Chapter 1

THE ROLE OF FINANCIAL MANAGEMENT

WHAT IS?
Management Finance

FINANCIAL MANAGEMENT

FUNCTIONS
Estimation of capital requirement Determination of capital composition Choice of sources of funds Investment of funds Disposal of surplus

Dividend

Retained

profits

Management of cash

ELEMENTS OF FINANCIAL MANAGEMENT

Investment decisions
Optimal

size Assets to be acquired Reduction of assets

ELEMENTS OF FINANCIAL MANAGEMENT

Financing decisions
Source
Period Cost

ASSET MANAGEMENT

Efficient management of assets

THE GOAL OF THE FIRM

Maximization of shareholders wealth

THE MODERN CORPORATION

Modern corporation

Shareholders

Management

ROLE OF MANAGEMENT

Agency theory