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Understanding Financial Management Basics

Finance is essential for businesses to operate, as it is needed to establish operations, acquire assets, develop products, and keep the business running. Financial management refers to planning and controlling a firm's financial resources and is concerned with raising funds, investing funds efficiently, and making decisions to maximize value. The key areas of financial management include investment analysis, working capital management, utilizing resources optimally, and determining dividend and investment policies.

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Sanjiv Kumar Yadav
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172 views15 pages

Understanding Financial Management Basics

Finance is essential for businesses to operate, as it is needed to establish operations, acquire assets, develop products, and keep the business running. Financial management refers to planning and controlling a firm's financial resources and is concerned with raising funds, investing funds efficiently, and making decisions to maximize value. The key areas of financial management include investment analysis, working capital management, utilizing resources optimally, and determining dividend and investment policies.

Uploaded by

Sanjiv Kumar Yadav
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPS, PDF, TXT or read online on Scribd

SANJIV KUMAR YADAV

FINANCE
Finance is the life-blood of business. Without finance neither any business can be started nor successfully run . Finance is needed to promote or establish business, acquire fixed assets, make necessary investigations, develop product keep man and machines at work ,encourage management to make progress and create values.

FINANCIAL MANAGEMENT
Financial management is one the functional area of management. It refer to that part of the management activity which is concerned with the planning and controlling of firms financial resources.
Financial management is the application of planning and control function of the finance function Howard and Upton

AREA OF FINANACIAL MANAGEMENT


Investment analysis
Working capital management Optimum utilization of resource Wealth maximization Dividend policy Analysis and risk Use of funds Financial decision

TRADITION AND MODERN CONCEPT


The tradition approach of business finance is concern with raising of funds used in an enterprise.
The modern approach lays emphasis not only on the raising of funds but also on their efficient utilization.

Objective of financial management


Wealth maximization

profit maximization Increase share holders

Scope of financial management


Financial management and economic Financial management and accounting Financial management and mathematics Financial management and production management

Financial management and marketing


Financial management and human resource

Function of financial management


Financial planning
Acquisition of funds Proper use of funds Financial decision Increase the value of the firm Promoting saving

Function of financial manger


Forecasting financial requirements
Acquisition necessary capital Investment decision Cash management Other department

Types of financial decision


Financial decision
Dividend decision Investment decision

Financial decision
Financing decisions - How should the company pay for the investments it makes? This determines the righthand side of the balance sheet. it is also known as capital structure decision. It involves the choosing the best source of raising funds and deciding optimal mix of various source of finance

Dividend decision
Dividend decisions - What should be done with the profits of the business? The dividend decision is concerned with determining how much part of the earning should be distributed among the share holders by way of dividend and how much should be retained in the business for meeting the future needs of funds internally.

Investment decision
What assets should the company hold? This determines the left-hand side of the balance sheet. these decision are concerned with the effective utilization of funds in one activity or the other. The investment decision can be classified under two groups(i) Long term investment decision (ii) Short term investment decision The former are referred to as the capital budgeting and the latter as the capital budgeting and the latter as working capital management.

Financial environment
Macro environment
Micro environment

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