FINANCIAL MANAGEMENT MODULE 1 PART 1

WHAT IS FINANCE ? è I am saving for retirement. Should I use a pension fund, mutual fund, direct stock market investment ? è I want that new car. Should I use my cash saving, lease, borrow? èWhich is the best way to pay for my house? è I’m thinking about starting a new business. Will it reward me adequately?

WHAT IS FINANCE ?

MAJOR AREAS OF FINANCE Finance Financial ServicesFinancial Management

MEANING OF FINANCIAL MANAGEMENT Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise.

SCOPE/ELEMENTS  Investment decisions  Financial decisions  Dividend decision- 1. Dividend for shareholders 2. Retained profits

OBJECTIVES OF FINANCIAL MANAGEMENT  To ensure regular and adequate supply of funds to the concern.  To ensure adequate returns to the shareholders  To ensure optimum funds utilization  To ensure safety on investment  To plan a sound capital structure

FUNCTIONS OF FINANCIAL MANAGEMENT  Estimation of capital requirements  Determination of capital composition  Choice of sources of funds  Investment of funds  Disposal of surplus  Management of cash  Financial controls

FINANCIAL MANAGEMENT AND RELATED DISCIPLINES Primary Disciplines Accounting Economics Other Related Disciplines Marketing Production Quantitative Methods Financial Management Investment Decision Capital Budgeting Working Capital Management Financing Decision Dividend Policy Decision Shareholder Wealth Maximization

ROLE OF THE FINANCIAL MANAGER (1) Cash raised from investors (1) (2) Cash invested in firm (2) (3) Cash generated by operations (3) (4a) Cash reinvested (4a) (4b) Cash returned to investors (4b) Firms Operations Financial Manager Financial Markets