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Lecture 1

Finance is the management of money, investments, and resources, encompassing personal, corporate, public, and international finance. It plays a crucial role in business growth, government funding, and economic stability through effective financial decision-making. Financial managers are responsible for planning, managing investments, and mitigating risks to maximize company wealth.

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25 views2 pages

Lecture 1

Finance is the management of money, investments, and resources, encompassing personal, corporate, public, and international finance. It plays a crucial role in business growth, government funding, and economic stability through effective financial decision-making. Financial managers are responsible for planning, managing investments, and mitigating risks to maximize company wealth.

Uploaded by

Muhammad Kamran Younus
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Definition:

provide funding for (a person or enterprise).

the management of large amounts of money, especially by governments or large companies.

It involves planning, raising, and utilizing funds effectively.

Finance is the study and management of money, investments, and resources over time. It's a
field that combines accounting, economics, and law.

Finance is defined as the management of money and includes activities such as investing,
borrowing, lending, budgeting, saving, and forecasting.

Finance is a term that addresses matters regarding the management, creation, and study of
money and investments. It involves the use of credit and debt, securities, and investment to
finance current projects using future income flows.

Scope of Finance:

📌 Personal Finance – Managing personal savings, loans, and investments.


📌 Corporate Finance – Managing business funds, investments, and financial planning.
📌 Public Finance – Government revenues, expenditures, and debt management.
📌 International Finance – Foreign exchange, international trade, and global investments.

Why is Finance Important?

✅ Helps businesses grow and expand.


✅ Ensures smooth operations (e.g., payroll, purchasing inventory).
✅ Helps governments fund infrastructure and public services.
✅ Influences stock markets, interest rates, and economic stability.

Financial Decision-Making

A company’s financial decisions fall into three major categories:

1. Investment Decision (Where to invest?)

 Selecting profitable projects or assets.

 Example: Should Tesla invest in new battery technology?

 Tools: Net Present Value (NPV), Internal Rate of Return (IRR).

2. Financing Decision (How to raise funds?)

 Choosing between debt financing (loans, bonds) and equity financing (stocks).
 Example: A startup may seek venture capital, while a large firm issues bonds.

3. Dividend Decision (What to do with profits?)

 Reinvest in the company (Retained earnings) or distribute as dividends?

 Example: Microsoft pays dividends, while Amazon reinvests profits into growth.

5. Role of Financial Managers


 📌 Who is a Financial Manager?
A financial manager makes key financial decisions for a company to maximize wealth.
 Key Responsibilities:
 1️⃣ Financial Planning – Setting budgets, forecasting revenues.
2️⃣Investment Management – Selecting profitable projects.
3️⃣Risk Management – Managing financial risks, hedging.
4️⃣Liquidity Management – Ensuring enough cash is available.

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