1. Financial Management “Financial Management is the area of business management devoted to a judicious use of capital and a careful selection of sources of capital in order to enable a spending unit to move in the direction of reaching its goals.” “Financial Management is the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations.”

2. Financial Management Decisions  Financing  Investment  Dividend  Working capital management

3. Investment decisions-Capital Expenditure decisions Importance  Long term effects  Irreversibility  Substantial outlays

4. Phases of capital budgeting  Planning  Analysis  Selection  Implementation  Review

5. SELECTION CriterionAccept when Pay back period (PBP)PBP < target period Accounting rate of return(ARR) ARR > target rate Net present value (NPV)NPV > 0 Internal Rate of Return(IRR) IRR > cost of capital Benefit cost ratio (BCR) /Profitability Index BCR > 1

6. Various facets of project Analysis  Market analysis  Technical analysis  Financial analysis  Economic analysis  Ecological analysis

7. Sources of finance Permanent sources  Share capital  Retained profits Long term sources  Redeemable preference shares  Debentures  Long term loans  Seed capital / venture capital

8. Sources of finance Medium term sources  Medium term loans  Deferred credit  Public deposits  Working capital term loans

9. Sources of finance Short term sources  Cash credit  Overdraft  Bills discounting  Trade credit