FINANCIAL MANAGEMENT

TYBMS SEM - 5
 EVOLUTION OF FINANCIAL
MANAGEMENT
 TRADITIONAL PHASE  MODERN PHASE
 THE FOCUS OF  THE APPROACH HAS
FINANCIAL BECOME MORE
MANAGEMENT WAS ANALYTICAL &
MAINLY ON QUANTITATIVE WITH
FORMATION, THE INFUSION OF
ISSUANCE OF CAPITAL, IDEAS FROM
EXPANSION, MERGER, ECONOMIC THEORY &
REORGANISATION, APPLICATION OF
LIQUIDATION. QUANTITATIVE
METHODS OF
ANALYSIS
CONTINUED..

 THE INSTRUMENTS OF  THE CENTRAL

FINANCING THE CONCERN IS
INSTITUTIONS & CONSIDERED TO BE A
PROCEDURES USED IN RATIONAL MATCHING
CAPITAL MARKETS & OF FUNDS TO THE
LEGAL ASPECTS OF USES SO AS TO
FINANCIAL EVENTS MAXIMISE THE
FORMED THE CORE OF WEALTH OF CURRENT
FINANCIAL SHAREHOLDERS.
MANAGEMENT.
CONTINUED…

 FINANCIAL • TODAY FINANCIAL

MANAGEMENT WAS MANAGEMENT HAS
VIEWED FROM THE BECOME AN INTEGRAL
POINT OF VIEW OF PART OF EVERY
INVESTMENT FINANCE
BANKERS, LENDERS & DEPARTMENT IN ALL
OTHER OUTSIDE ORGANISATIONS.
INTERESTS.
 GOAL OF FINANCIAL MANAGEMENT

THE MAIN AIM OF FINANCIAL

MANAGEMENT IS TO MAXIMISE
SHAREHOLDERS WEALTH WHO ARE THE
REAL OWNERS OF THE COMPANY & THEY
DETERMINE THE MANAGEMENTS FINANCIAL
POWER.
THUS THE SHAREHOLDERS SHOULD BE
GURANTEED HIGHER RETURNS .
 FINANCIAL DECISIONS IN A FIRM

1. CAPITAL BUDGETING :
IT IS THE PROCESS IN WHICH MANAGERS
CHOOSE TO INVEST THEIR FUNDS INTO
LONG-LIVED (FIXED) ASSETS.CONSIDERABLE
MANAGERIAL TIME , ATTENTION AND ENERGY
IS DEVOTED TO IDENTIFY, EVALUATE AND
IMPLEMENT INVESTMENT PROJECTS.
2. CAPITAL STRUCTURE :
CAPITAL STRUCTURE & DIVIDEND
DECISIONS SHOULD BE GUIDED BY
CONSIDERATIONS OF COST AND
FLEXIBILITY . THE OBJECTIVE SHOULD BE
TO MINIMISE THE COST OF FINANCING
WITHOUT IMPAIRING THE ABILITY OF THE
FIRM TO RAISE FINANCES REQUIRED FOR
VALUE CREATING INVESTMENT PROJECTS.
3. WORKING CAPITAL
MANGEMENT :
IT REFERS TO THE DAY TO DAY
FINANCIAL ACTIVITIES OF THE FIRM THAT
DEAL WITH CURRENT ASSETS AND
CURRENT LIABILITIES .
(BASICALLY SHORT TERM)
 ROLE OF THE FINANCIAL
MANAGER
The key challenges for the manager in the
areas specified are as follows :
• Financial structure
• Foreign exchange management
• Treasury operations
• Investor communication
• Management control
• Investment planning .
 KEY ACTIVITIES OF
FINANCIAL MANAGER

• Performing financial analysis and planning

• Making investment decisions
• Making financing decisions