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    Unit 2

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    sheetal gudse
    Financial management involves three main functions: (1) investment decisions about allocating funds to fixed and current assets; (2) financing decisions about a firm's capital structure including the appropriate debt to equity mix; and (3) dividend policy decisions about paying out profits to shareholders. The goal of financial management is to efficiently acquire and utilize funds to maximize a firm's profits while maintaining sufficient liquidity through activities like budgeting, investing, and managing working capital.

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    Unit 2

    Uploaded by

    sheetal gudse
    29 views16 pages
    Financial management involves three main functions: (1) investment decisions about allocating funds to fixed and current assets; (2) financing decisions about a firm's capital structure including the appropriate debt to equity mix; and (3) dividend policy decisions about paying out profits to shareholders. The goal of financial management is to efficiently acquire and utilize funds to maximize a firm's profits while maintaining sufficient liquidity through activities like budgeting, investing, and managing working capital.

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    Financial management involves three main functions: (1) investment decisions about allocating funds to fixed and current assets; (2) financing decisions about a firm's capital structure including the appropriate debt to equity mix; and (3) dividend policy decisions about paying out profits to shareholders. The goal of financial management is to efficiently acquire and utilize funds to maximize a firm's profits while maintaining sufficient liquidity through activities like budgeting, investing, and managing working capital.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    29 views16 pages

    Unit 2

    Uploaded by

    sheetal gudse
    Financial management involves three main functions: (1) investment decisions about allocating funds to fixed and current assets; (2) financing decisions about a firm's capital structure including the appropriate debt to equity mix; and (3) dividend policy decisions about paying out profits to shareholders. The goal of financial management is to efficiently acquire and utilize funds to maximize a firm's profits while maintaining sufficient liquidity through activities like budgeting, investing, and managing working capital.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 16

    1

    OMBC 203
    FINANCIAL MANAGEMENT (FM)

    Unit 2:
    Financial System

    2
    Money itself is neither created nor destroyed,
    its simply transferred from one perception to another.

    3
    4
    What is Financial ?

    5
    What is Financial ?

    Finance is the art & science of managing


    'MONEY'.

    Finance is the life blood of Business (funds).

    “Finance v/s Money”

    6
    FINANCE

    Financial services Financial Mgt

    Advisory services Mgt of finance dept in a firm

    Financial/ non-
    Designing Financial products
    financial/public/private/NG O

    Investments, real estate &


    Budgeting Forecasting
    insurance

    Cash & credit mgt Invst analysis


    Personal Financial planning
    etc

    7
    Financial Management

    • According to Ezra Solamn “Financial management is


    concerned with the efficient use of an important economic
    resources viz capital funds”.

    • Financial Management means planning, organizing, directing


    and controlling the financial activities such as procurement
    and utilization of funds of the enterprise.
    Meaning: Financial Management
    • Financial Management is an operational activity, which is
    accountable for the effective utilization of funds necessary for
    operations. One of the primary objectives of financial
    management is to maintain enough money to meet the
    necessary current and capital expenditure, apart from
    maximizing profits.
    Nature of Financial Management

    • Financial management is mainly concerned with the proper


    management of funds.

    • The financial manager must see that the funds are procured in a
    manner that there is risk, cost and control considerations are
    properly balanced in a given situation and there is optimum
    utilization of funds.
    Financial Management Process

    Assess Current Financial Position

    Define and Prioritizing Goals

    Financial and Investment Plan

    Implementation of the Plan

    Monitor, Evaluate and Adjust Performance


    Scope of Financial Management

    • Scope covers both acquisition & utilisation of funds – efficient


    and wise allocation of funds to various uses.
    • Financial mgt involves providing solutions for major financial
    operations of a firm
    o Investment decisions
    o Financing decisions
    o Dividend policy decisions
    Investment decision/ function

    • Investment decisions relates to the selection of assets (fixed


    & current assets) in which funds will be invested by a firm.

    • Invest in fixed & long term assets & projects is called


    capital budgeting – volume of invest, risk & returns , cost
    of capital.

    • Invest & mgt of current assets is called working capital mgt –


    mgt of cash, inventory & receivables, profitability & liquidity.
    Financing Decision / Function

    • Financing decisions are concerned with the Capital structure


    decisions of a firm (proportion of debt & equity).

    • Creating proper mix between debt & equity – optimum


    capital structure.

    • Trade off between risk & return.


    Dividend policy decisions / functions

    • Deciding the Dividend payout ratio considering the benefit


    of shareholders & firm both.

    • Dividend decision should be analysed in relation to the


    financing decisions of the firm.
    THANK YOU
    16

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