January 03/10, 2019

Prof Peeush Ranjan Agrawal

MBA II [MS42101]: Financial Management

1. Scope :
I. Used by Academicians and Managers both
II. An inter-disciplinary Subject
III. Based on Economic theories and Practices > DD &
SS, Production Function > Land, Labor, Capital,
Orgn,… FM is an extended managerial activity, based
upon the input of the Accounting/Cost/Management
Reports, Annual,Quarterly,Monthly,Daily,Seasonally.
Analyzed to the situational needs towards effective
decisions.
Use historical data towards > Futuristic projections >
Relative Study > Inter-Organizational> Intra-
Organizational > Analyzing Factors to Change,
Controllable or, and Uncontrollable .

2. Function of the Management:

In-separable three Activities for a FM
I. Production: In Machines ,Tools, Wear & Tear,
R&M > Working Capital,
Technology > Adding value, Fetching Demand,
Meeting Market Standards, Reaching to Buyers.
II. Marketing: En-cashing Investments, long
term,short term.
III. Investment: Own > Promoters’ Capital, Retained
Earnings.
Creditors, Borrowed, Equity, Quasi Equity
Domestic, International Financial Markets.
Investment in Real Assets and Notional Assets:

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 Tangible & Intangibles > Copy Right, Patent,
Technology, Know-how, Collaboration, Franchisee.
Financial Assets> Investment in Shares, Bonds, MF, ,
Money Market Instruments, LIC
A knowledge society is replacing large fixed
investments in real assets> newer
technologies>logistics.
3. Activities:
An Accountant records financial transactions
A Management Accountant puts it to in analytical
Formats, seasonal sales, cash collection,
Inventory, EMI payment:
Equity vs. Debt, Purchase (Interest) vs.
Lease (Rent), Own Brand vs, Franchisee
FM plans to offer tools to the decisions
P&L> Cash Flow/Fund Flow> Ratio Analysis>
Capital
Budgeting > Future Investment > Dividend Decision,
Market Share Price, Valuation of Firm> R&D.

4. Finance Function:
A normal simultaneously Functions, not done
in sequence unlike P&L A/C in AGM, IT Filing.
I. Finance Decision : Long Term and Short Term
II. Investment Decision : -do-
III. Dividend Decision: -do-
Liquidity Decision: Short Term Objective of Financial
Management: Working Capital For Festival Season.
5. Objective:
I. For Profit Making Organization: Maximization of
Profit and Shareholders’ Wealth Maximization
(SWM).
II. For a Non Profit Making Organization (NGO):

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 Input/
Output/ Ratio or Efficiency, Minimization of Cost
and Maximization of Notional Satisfaction.

6. Ingredients to Meet Objective:

{Few Commonly Used Phenomena , Have Long
Term Financial Implications} e.g. sales volume,
order book, competitors, market share, new
product in market.

 Pricing Decision > Never Go for Distress Sales;

Avoid ‘Deep- Pocket- Strategy’
 Costing > Competitiveness, Survival-first
 BEP> Reach First in Safe Zone, Shorten Creditors’
List
 Economy- of- Scale > Advantage of Volume
 Discount/Premium > Recover Cost with Attracting
Customers, Reachiblity,
 Incentives > Retailers , Employees
 Volume > Capacity Utilization, Demand of Product
 Market Share > Expanding Market Base, Shorten
Debtors’ List,
 Market Capitalization > Shareholders’ Value

7.Three Stakeholders: Equally Important

I. Equity Shareholders: Profit > Dividend > Share
Price
II. Employees: Salary, Incentives, Promotion,
sustainability and
III. Customers: Value for Money

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