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Module 1: Introduction to Basic Finance

Finance and Financial Management as Defined.

FINANCE
 Is the study of money and money management?
 Is the study of how individuals or business evaluate investment opportunities,
business proposals and business projects and raise capital to fund them?

FINANCIAL MANAGEMENT
 Is the efficient and effective management of funds?

Financial Institutions and the Key Individuals Who Play Vital Roles

1. The Role of Money

Money is anything that is generally accepted in payment for goods and services. It may also be
used to transfer purchasing power to the future. Money could also act as a store of value form
one time period to another.

2. The Role of Interest Rates

Interest is the cost of credit; it is the price paid for the use of someone else’s money.
The cost of credit is often expressed as a percentage that is the rate of interest.

3. Financial Instruments and Financial Markets

Financial Institutions include banks and non-banks. These are your commercial banks, universal
banks, investment banks, investment companies, life and non-life insurance companies, mutual
fund companies and private equity firms.

2: FINANCIAL PLANNING
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1. Planning and financial plan as defined.

Is the process of estimating the capital required and determining its competition. It is the
process of framing financial policies in relation to procurement, investment and administration of
funds of an enterprise.

A financial plan is a comprehensive document that includes details about your cash flow,
savings, debts, investments, insurance and other elements of your financial life.

2. Importance of Planning
Financial Planning helps in making growth and expansion
3. How to make financial plan.
programs which helps in long-run survival of the company.
You can make a financial plan yourself, or you can get help
Financial Planning reduces uncertainties with regards to
from a financial planning professional. No matter which route
changing market trends which can be faced easily through
you go, financial planning starts with these seven steps:
enough funds.
1. Set goals
Financial Planning helps in reducing the uncertainties which
can
2. bewhere
See a hindrance to growth
your money goesof the company. This helps in
ensuring stability and profitability in concern.
How to make a Financial Plan 3. Get that employer match

4. Prepare for emergencies

5. Attack toxic debt

6. Invest to really grow your savings

7. Create a “moat” to protect and grow financial well-being

4. Objectives of Financial Planning

• Determining capital requirements
• Determining capital structure
5. Budget Preparation and importance of Cash budget

Budget Preparation- a critical aspect of intervention planning is preparing a budget of income and

expenses. The budget must include funding for materials and supplies for the intervention
activities, but also for staff, facilities, and promotion.

BUDGET
ASSISTS W ITH REVEALS ADJUSTM ENT
REVEALS
THE REVEALS W EAKNESSES FOR
PERIODS BUDGETS ARE
IDENTIFICATI PERIODS OF IN BUSINESS'S SEASONAL
W HEN A FORM OF
ON OF W HEN EXCESS DEBT FLUCTUATION
SHORTAGES CONTROL
COM M ITM EN FUNDS COLLECTION S CAN BE
OF FUNDS
TS ARE DUE POLICY M ADE
M AY OCCUR

6. Examples of Cash Budget

 Cash Receipts
 Cash Disbursements

7. The 5Cs of Credit will help the borrower to perform better liquidity.
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CHARACTER CAPACITY CAPITAL

COLLATERAL CONDITIONS