FINANCIAL MANAGEMENT

FM may be defined as the art & science of managing

finance.

FM is concerned with the duties of the financial

managers in the business firm.
MEANING
WHY TO STUDY FINANCIAL MANAGEMENT
SCOPE
Anticipation : Financial management estimates the
financial needs of the company. That is, it finds out how
much finance is required by the company.

Acquisition : It collects finance for the company from

different sources.

Allocation : It uses this collected finance to purchase fixed

and current assets for the company.
Appropriation : It divides the company's profits among
the shareholders, debenture holders, etc. It keeps a part
of the profits as reserves.

Assessment : It also controls all the financial activities of

the company. Financial management is the most
important
 objectives

To provide a framework for optimum financial decision

making by designing a method of operating the internal
investment and financing of a firm.

Profit Maximisation

Wealth Maximisation
Profit Maximisation

Wealth Maximisation
Focus on stakeholders ,stakeholders include groups such as employees,
customers, suppliers, creditors, owners and others who have a direct link to the
firm.
EVA (Economic Value Added) EVA is equal to the after-tax operating profits
of a firm less the cost of the firm to finance investments.
 Relationship of financial management and other supportive
disciplines is:

Financial Decision Areas Primary Disciplines

1. Investment analysis 1. Accounting
2. Working Capital Management 2. Macroeconomics
3. Sources and cost of funds 3. Microeconomics
Support
4. Determination of capital structure
5. Dividend Policy
6. Analysis of risk and returns Other Related Disciplines
Support
1. Marketing
Resulting in
2. Production
Shareholder wealth maximization 3. Quantitative methods
 Functions of Finance under
Modern Approach
Financial Management in the modern sense of the
firm can be broken down into three major decisions
as functions of finance:

The investment decision

The financing decision
The dividend decision