FINANCIAL MANAGMENT

LECTURE # 1
MUHAMMAD ASAD

INSTRUCTOR
DEPARTMENT OF COMPUTER SCIENCE
Key Learning Point :-

- Discussion about the importance of finance management

 MONEY

Something that serves as

- Medium of exchange
- Unit of accounting
- Store of value
 Money available at the present time has More worth In the
future - Due to its potential earning capacity.
REALITY
 FINANCIAL MANAGEMENT
What is finance? (Nothing else but money)

 As the name itself gives a brief description, financial management is the

management of business’s financial resources --- In relation to its
Acquisition & Allocation.

ASPECTS OF FINANCIAL MANAGEMENT

FINANCE FINANCE
ACQUISITION ALLOCATION
FINANCE ACQUISITION
 The organization acquires funds from equity and debt sources to finance the
organization financial needs --- Such as Owner’s funds (equity shares &
preference shares), commercial banks, venture capital, debentures & bonds,
leasing and etc.

FINANCE ALLOCATION
 The organization allocate funds to produced goods & services (to be invested
in projects).
WHY DO WE MANAGE FINANCE?

 Raising finance for the business to meet short term and long term
requirement, control over its use and creating a balance between
risk and return.

 To harvests good returns for the organization --- Without posing a

threat to its overall creditworthiness.
OBJECTIVES OF FINANCIAL MANAGEMENT

 Maximization of shareholder wealth --- The value of stock held by

investors.

 When we say that the goal of financial managers is to maximize

shareholder wealth, we really mean the wealth derived from the shares
they hold.

 Wealth maximization is the concept of increasing the value of a business

in order to increase the value of the shares held by its stockholders.
 The concept requires a company's management team to continually
search for the highest possible returns on funds invested in the business,
while mitigating any associated risk of loss.

 Agency theory explains the relationship principals & agents in the

business, between shareholders (party determines the work --- principals)
and management (party does the work --- agents).

 Finance managers are the agents of shareholders and their job is to look
after the interest of the shareholders --- The objective of any shareholder
or investor would be a good return on their capital and safety of their
capital.
 ANY QUESTION

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