Chapter 1

INTRODUCTION
BY
SUKU THOMAS SAMUEL
Department Of Management
 Ministry of Finance
• Responsible of managing fiscal policy of the country.
• Prepares the Union budget.
• Divided into 5 major departments:
1. Department of Expenditure
2. Department of Revenue
3. Department of Financial Services
4. Department of Investment and Public Asset Management
5. Department of Economic Affairs
 What is Finance?

Management of Finance is called as Finance

Finance

Personal Public
finance finance
 Definition

Financial Management means planning, organizing, directing

and controlli ng the financial activities such as procurement and
utilization of funds of the enterprise.

• Planning - Set goal/objective

• Organizing - Raise Money
• Directing - Utilize Money
• Controlling - Sustain
 Evolution of Finance
• Branch of Economics
• Adam Smith – Wealth of Nations
• Management of Economic
resources
• Money = Resource
• Finance Management = Money
Management
 Evolution of Finance
 Evolution of Finance from economics has 4 major
phases
A. Traditional phase.
B. Transitional phase.
C. Modern phase.
D. Post modern phase.
Evolution of Finance
 Traditional Phase
 1920’s – 1950’s
 Corporate finance – Financing corporates
 Raising funds
 Source of fund
 Instrument of fund

 Emphasis was on capital formation

 Outsiders view point
Evolution of Finance
 Transitional
Phase
1940’s – 1950’s
Focus on day-to-day issues
 Modern Phase
4 major areas of decision making
 Post Modern Phase
Globalisation
Function of Financial Management
 Financing Decision
 Raising funds
 Investment Decision
 Spending funds
 Working Capital Management
 Money for day to day activities
 Dividend Decision
 Distributing profit
Objectives of Finance

Profit Maximization Wealth Maximization

 Increase profit  Increase shareholders wealth
 Maximize output  Maximize market share
 Minimize cost  Improve branding
 Profit = Sales - expense
Profit Maximization
 Purpose to earning profit
 Also know cashing per share maximization
 Considers all the possible ways to increase the profitability
 Efficiency is measured in terms of profit
 Reduce the risk of the business

Limitations
– Ignores the time value of money
– Over exploitation of resources
– Ignores risk
Wealth Maximization
 Also known as value maximization
 Provides efficient allocation of resources
 Ensures the economic interest of the society
 Considers both time and risk of the business concern

Limitations
Form of indirect profit maximization
Ownership-management conflicts
Management alone enjoy certain benefits
 Organization of Finance

Shareholders

Board of Directors

CEO

VP – VP –
VP – Finance VP – HR
Marketing Operations

Treasurer Controller
 Organization of Finance

TREASURER CONTROLLER
 Cash Management  Accounting
 Credit Management  Audit
 Banking Management  Budgeting
 Portfolio Management  Taxation
Functions of Financial Manager

 Forecasting Financial Requirements

 Acquiring Necessary Capital
 Investment Decision
 Cash Management
 Interrelation with Other Departments
Financial Management – Assignment
 Write 5 – 6 lines about each topic.
 One example from the internet for each topic.
• Digital transformation
• Artificial Intelligence
• Block chain
• Design Thinking
• Big Data
• Cloud computing
 Hand written with cover page.
 Cover page must have Name, Roll number, Subject.
 Assignment to be scanned and converted as PDF.
 Uploaded onto the Google form link shared.
 https://forms.gle/yTnsznJoCBL7UPNT6