Professional Documents
Culture Documents
Goals of Financial
Management
Wealth Maximisation
Maximisation of Profit Maximisation of Earning per share Maximisation of return on equity-
Other concerns
High rate of growth
Substantial market share
Product and technological leadership
Employee welfare
Customer Satisfaction
Support education and research
Improve community life and other
societal problems
Shareholder Orientation in
India
Foreign Exposure
Greater dependence on Capital
Market
Growing importance of Institutional
investors
Abolition of wealth tax on financial
assets
Organisation of finance
function
Relationship of finance to
economics
Macro economic
Micro economic
Relationship to accounting
Score keeping vs value maximising
Accrual method vs cash flow method
Certainty vs uncertainty
Functions of Financial
system
Payment system-for the exchange of
goods and services
Pooling of funds-for undertaking
large scale enterprises
Transfer of resources
Risk management
Coordinating decentralized decision
making
Dealing with information asymmetry
Financial Instruments
Coins, currency notes, demand
deposits, corporate debentures, giltedged securities, equity shares,
futures and options
Financial assets/ financial liabilities
FA represents claim against future
income and wealth of others.
FL represent promises to pay some
proportion of prospective income and
wealth to others
FA & FL
Money issued by RBI & Ministry of finance
Demand deposit promise to repay given sum as and when demanded by the holder.
Interest Y/N
Short term debt promise to repay given sum with interest within period of 1 year
Intermediate term debt promise to repay given sum with interest within period that exceeds
1 year but is less than 5 years
Long term debt stream of interest over long period of time and then repay in
lumpsum /installment
Equity stocks
Financial Institutions
Financial Markets
Money market
Capital market
Primary market
Public issue
Right issue
Private placement
Secondary market