Money management

A Presentationby

ANKIT PORWAL

Meaning and DefinitionFinancial Management is the operational activity

of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operation.

- Joseph and Massie

Financial management is an area of financial decision making, harmonizing individual motives and enterprise goals.

-Weston and Brigham

Meaning and DefinitionBusiness Finance can be broadly defined as the

activity concerned with planning, raising, controlling and administering of funds in the business.

-H G Gathman & H E Dougall

Financial management may be defined as the area or set of administrative functions in an organisation which relate with arrangement of cash and credit so that the organisation may have the means to carry out its objective as satisfactorily as possible.

-Howard & Opton

Goals of Financial ManagementProfit MaximizationWealth MaximizationBalanced Asset StructureLiquidityJudicious Planning of FundsInnovateFinancial Discipline

Decisions of Finance Manager1. Investment decisions-costing, capital

budgeting and CVP analysis.2. Financing decisions-Equity, Preference and

Debt.3. Dividend decisions.4. Current Asset Management/Working Capital

decisions.

Role of Finance ManagerTraditional Role Primary market- Secondary market- Financial

Institutions- Leverages- Capital Structure –Deployment of funds- capital budgeting- CVP Analysis- Working capital management- Dividend decisions.

New Role Mergers- Tax planning- Cost Reduction

strategies- Access to foreign investment- Forex management- Information technology- Communication network- Learning attitude

Organisation chart for finance function

Cash and bank Investments Tax and Insurance Credit collection Relation with banke

I

Chief Finance Officer

Treasurer Controller

Cash and bankInvestmentsTax and insuranceCredit collectonRelation with bankers

AccountingBudgetingFinancial planningInvestment decisionsEconomic appraisal

Cost accountsInternal auditProfit planningProtection of assetsAnnual Reports

Indian Financial System

Financial Institutions

Financial Instruments

Financial Markets

Suppliers of funds

Individuals Businesses

Suppliers-Individuals, Businesses, Government

governmentGovernment

Commercial, Development Banks,NBFC

Term Loans,Leasing,H.P, C.C,

O/DShares,

Debentures,Public

depositsCapital market,Money market

Demanders-Individuals, Businesses, Government

RBI

SEBI

Profit Maximisation vs wealth maximisation

Arguments in favour of profit maximization1.It is rational as well as natural objective.2.It helps to face the unfavorable situations.3.It helps for proper utilization of resources.4.It helps for growth and development of

organization.5.It helps for maximizing social welfare.

Objections against profit maximisation

1. It is vague.2. It ignores time value of money.3. It neglects social responsibilities of

business.

Arguments in favour of wealth maximisation

1. It is clear and unambiguous.2. It considers time value of money.3. It ensures regular payment of dividend.4. It protects the economic welfare of the

shareholders.5. It helps for growth and development of the

organisation.

Objections against wealth maximisation.

1. Equality of wealth is not maintained.2. Govt. restrictions.3. Reduce the profitability.