1. CAIIB-FINANCIAL MANAGEMENT MODULE-C – RATIO ANALYSIS a)RATIO ANALYSIS b)STATEMENT OF SOURCES AND APPLICATION OF FUNDS c)WORKING CAPITAL d)MARGINAL COSTING e)CAPITAL BUDGETING f)CASH BUDGET

2. FINANCIAL MANAGEMENT WORKING CAPITAL TYPES OF WORKING CAPITAL a)PERMANENT WORKING CAPITAL b)VARIABLE WORKING CAPITAL  WORKING CAPITAL CYCLE / OPERATING CYCLE  MANAGEMENT OF STOCK LEVELS  MANAGEMENT OF DEBTORS  MANAGEMENT OF BANK AND CASH BALANCES  MANAGEMENT OF TRADE CREDIT

3. FINANCIAL MANAGEMENT WORKING CAPITAL MANAGEMENT INVOLVES: oThe level of cash needs to be on call at various dates. oThe level of inventory do we need to maintain. oThe bank overdraft. oThe period of credit do we grant to our debtors. oSuppliers’ payments. oProportion of Current assets should be financed by short-term funds. oLevel of Working Capital. METHODS OF CALCULATION: oCash Budget Method oMPBF oTurnover Method Commercial Paper one source of finance for Working Capital

4. FINANCIAL MANAGEMENT MARGINAL COSTING Concept of costs Fixed Cost Variable Cost Semi Fixed / Variable Marginal Cost = Variable Cost Contribution = Sales – Marginal Cost USES: More efficient pricing decisions can be made Make or Buy Decisions Close a department or cost centre Accept or Reject an order C-V-P Analysis B-E-P Analysis Margin of Safety

5. FINANCIAL MANAGEMENT CAPITAL BUDGETING:  Capital budgeting involves the entire process of planning expenditures whose returns are expected to extend beyond one year. Non discounting Methods Pay Back Method Rate of Return Method Discounting Methods based on Time Value of Money Net Present Value Method IRR PI

6. FINANCIAL MANAGEMENT CASH BUDGET: Budgets are similar to standards in several ways: They are of the future performance of our organization. They help people within an organization plan the future and They enable people to know how well they and the rest of the organization have performed. Budgetary Control: oThe comparison of actual results against budget; oThe identification, recording and communication of controllable differences; and oThe taking of corrective action either to maintain budget levels or to re-plan to meet recent developments.

7. FINANCIAL MANAGEMENT CASH BUDGET: A Cash Budget is arrived at through a projection of future cash receipts and cash disbursements of the firm over various intervals of time. It reveals the timing and amount of expected cash inflows and outflows over the period studied.

8. FINANCIAL MANAGEMENT CASH FLOWS STATEMENTS oCash flows statement is basically a summary of all the entries that are normally recorded in the cash book. oFunds flow statement means the funds received by the company and their how it uses.

9. FINANCIAL MANAGEMENT RATIO ANALYSIS: The term Ratio refers to the numerical or quantitative relationship between two items / variables, expressed in a simple mathematical form. Balance sheet Ratios: oCurrent Ratio or Working Capital Ratio oLiquid Ratio or Quick Assets Ratio or Acid Test Ratio oProprietory Ratio oAssets – Proprietoryship Ratio oProfit and Loss Account Ratios

10. FINANCIAL MANAGEMENT Profit and Loss Account Ratios: Gross Profit Ratio Operating Ratio Expenses Ratio Net Profit Ratio Stock Turnover or Turnover of Inventory Ratio

11. FINANCIAL MANAGEMENT Balance Sheet and Profit and Loss Account Ratios:  Return on Total Resources Ratio  Return on Own Funds Ratio  Fixed Assets Turnover Ratio  Debtors’ Turnover Ratio  Earnings per Share Ratio Liquidity Ratios:  Current Ratio  Net Working Capital  Acid Test / Quick Ratio

12. FINANCIAL MANAGEMENT Turnover Ratios: oInventory Turnover Ratio oDebtors’ Turnover Ratio and oCreditors’ Turnover Ratio Leverage / Capital Structure Ratios: oDebt / Equity Ratio Coverage Ratios:  Interest Coverage Ratio  Dividend Coverage Ratio

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