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.