Professional Documents
Culture Documents
Finance Management
Guided by:- Dr. Yogesh A. Chauhan
Prepeared by:-
Aziz Companiwala
Financial Management
Financial Management can be defined as the science and art of managing money.
• how they decide whether to reinvest profits in the business or distribute them back to investors.
Functions of financial Manager
• Cash management
• (receipt and disbursement of funds)
• Credit management
Daily • Inventory control
• Short-term financing
• Foreign Exchange hedging
• Bank relations
• Intermediate financing
• Bond issues
• Leasing
Occasinally • Stock issues
• Capital budgeting
• Dividend decisions
• Forecasting
The Goals of Financial Management
• To ensure safety on investment, i.e, funds should be invested in safe ventures so that
adequate rate of return can be achieved.
• To plan a sound capital structure-There should be sound and fair composition of
capital so that a balance is maintained between debt and equity capital.
Functions of Financial Management
• Estimation of capital requirements: A finance manager has to make estimation with regards
to capital requirements of the company.
• Determination of capital composition: Once the estimation have been made, the capital
structure have to be decided. This involves short- term and long- term debt equity analysis.
• Choice of sources of funds: For additional funds to be procured, a company has many
choices like-
• Issue of shares and debentures
• Loans to be taken from banks and financial institutions
• Public deposits to be drawn like in form of bonds.
• Choice of factor will depend on relative merits and demerits of each source and period of
financing.
Functions of Financial Management
• Investment of funds: The finance manager has to decide to allocate funds into profitable
ventures so that there is safety on investment and regular returns is possible.
• Disposal of surplus: The net profits decision have to be made by the finance manager. This
can be done in two ways:
• Dividend declaration - It includes identifying the rate of dividends and other benefits like bonus.
• Retained profits - The volume has to be decided which will depend upon expansional,
innovational, diversification plans of the company.
• Capital Budgeting:
• Capital Structure:
That is:-
• Every running business needs working capital. Even a business which is fully
equipped with all types of fixed assets required is bound to collapse without
(i) adequate supply of raw materials for processing;
(ii) cash to pay for wages, power and other costs;
(iii) creating a stock of finished goods to feed the market demand regularly; and,
(iv) the ability to grant credit to its customers.
• Functions involve:
– raising funds for the firm at minimal cost and acceptable risk
– investing those funds in company assets so as to earn an attractive return given
acceptable risks
Conclusion:-
Activities include:
– Working Capital Management
• short-term (S/T) financial decisions (<1 year)
• ex., managing cash and other current assets
– Capital Budgeting
• long-term (L/T) financial decisions (>1 year)
• ex., purchasing a new machine in the future
– Financing decisions
• how to raise money
• loans? leases? shares? bonds?
Thank You