1. FINANCIAL MANAGEMENT
AN INTRODUCTION

2. FINANCIAL MANAGEMENT DEFINED
This is the business management function that is concerned with managing a business’ finances. 
It refers to the application of financial management tools and techniques to coordinate all the financial functions in the business.
Dr. Rakesh Kumar

3. Financial Management Management + Finances
Is all about managing financial resources optimally in order to achieve desired objective, which is preset.
FM Financial department
Responsibility of
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4. Objectives of Finance Maximization of market share.
Maximization of ROI.
Maximization of profits.
Achieving a specific service level.
Satisfying all stakeholders to maximum possible extent.
Maximization of shareholder’s wealth.
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5. Functions of a Financial Manager
Spearheading the process of capital budgeting
Managing the liquidity of the firm.
Sourcing and utilization of funds
Financial analysis and planning.
Taking custody of company’s valuable documents
Paying suppliers
Monitoring the banking operations
Budgeting and forecasting
Proper earnings management
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6. Organization of Financial Department
CFO
Treasurer
Capital budgeting
Administer credit
Manages cash
Obtain finances
Controller
Taxation
Management accounting
Internal audit
Financial accounting
Supervises
Main functions are
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7. Main functions of the department
Facilitation of finances.
Allocation of finances.
Utilization of finances.
Control of finances.
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8. Importance of Proper Financial Management
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9. Importance of FM Contd…
Maximize use of financial resources
FM allows you to identify and plan for the use of your financial resources.
It provides information for financial decision making.
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10. Importance of FM Contd…
Evaluate new business opportunities
FM provides the key information and answer questions of whether to exploit such opportunities or not.
That is, entrepreneurs can effectively analyze a business opportunity and determine whether it is worthwhile or not.
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11. Importance of FM Contd…
Measuring business performance
FM helps the investor to monitor the progress of their business towards achieving business goals and to take corrective action where necessary.
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12. Importance of FM Contd…
Making sound business decisions
The financial information systems provides a wide range of information that can be used to make better decisions.
This is done using financial ratios, break even analysis etc.
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13. Financial Decisions Investment decisions Financing decisions
Dividend Decisions
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14. 1. Investment Decision
This is also known as the Capital budgeting, and it refers to the decision to invest in long term assets.
The assets are expected to be used over a long period of time e.g. when a firm acquires plant and equipment or replaces an old equipment or when you invest in research and development.
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15. Importance of Capital Budgeting
It determines the asset mix and hence the business risk.
It involves heavy initial outlays of the business resources.
Benefits accrue in future which future is associated with risk and uncertainty.
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16. Practical Financial Management Problem.
Investment appraisal using NPV, IRR, Pay back period.
Cost of capital
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17. Working capital decision
This is the decision concerned with the short term assets/resources an organization uses to meet its day to day obligations.
Such assets include:
Cash reserves of the organization
Funds collected from debtors of the organization.
Inventories
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18. 2. Financing Decision
This is the decision concerned with the sourcing of funds that are utilized under the investment decision.
Much management time and effort is devoted to trying to ensure the adequacy of the company's profit flow.
However, it is just as important that a company has an adequate flow of funds if it is to remain in business and very much less management time and effort is devoted to this need.
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19. Financing decision Contd…
As companies expand, they require growing amounts of cash to finance acquisitions of fixed assets. They also require growing amounts of cash to finance their growing working capital (net current assets) requirements. Some of this funding requirement will come from INTERNAL sources, whilst some will need to come from EXTERNAL sources.
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20. 3. Dividend Decision
The Financial Manager has to decide on what to do with the earnings once they have been realised. There are three options,
To declare and pay all dividends to shareholders
To retain all the earnings and hence declare and pay no dividends
To decide on what proportion to be paid and what to be retained.
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21. Considerations in dividends payment
Internal restrictions that do not favour dividend payment
Legal considerations.
Level of the firm’s leverage position.
Ease of raising additional capital.
Will payment of dividends disadvantage the shareholders or investors?
The preferences of the majority shareholders.
Existence of profitable investment portfolio.
The levels of control desired by the shareholders
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22. THANKS FOR YOUR PATIENCE
Dr. Rakesh Kumar
ASST. PROF.BUSINESS ADMINISTRATION
PGGC-11 ,CHANDIGARH
Dr. Rakesh Kumar