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Lesson 1 - Intro To FM

This document provides an introduction to financial management. It defines financial management as the process of planning, acquiring, and utilizing funds in a way that achieves a firm's goals of making money and adding value for owners. There are three main types of financial decisions: investment decisions about committing funds to projects, financing decisions about the mix of debt and equity used, and dividend decisions about payments to owners. Financial objectives include short-term returns, long-term growth and survival. Responsibilities to achieve these objectives include evaluating investments, determining financing needs, and making operating decisions around cash levels and credit policies.

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Stanley Aquino
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37 views

Lesson 1 - Intro To FM

This document provides an introduction to financial management. It defines financial management as the process of planning, acquiring, and utilizing funds in a way that achieves a firm's goals of making money and adding value for owners. There are three main types of financial decisions: investment decisions about committing funds to projects, financing decisions about the mix of debt and equity used, and dividend decisions about payments to owners. Financial objectives include short-term returns, long-term growth and survival. Responsibilities to achieve these objectives include evaluating investments, determining financing needs, and making operating decisions around cash levels and credit policies.

Uploaded by

Stanley Aquino
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Lesson 1: Introduction to Financial a.

quantum of profits to be
Management distributed to the owners,
b. the frequency of such
payments; and
Nature of Financial Management c. the amounts to be retained by
the firm.
- a.k.a. business finance, managerial
finance Financial Objectives of Business
- a decision-making process concerned Organization
with:
 Short and Medium-Term
 planning
- Maximization of return on capital
 acquiring
employed or return on investment
 utilizing funds - Growth in earnings per share through
in a manner that achieves the firm’s maximization of net income or profit
goal. - Efficient procurement and utilization
of short-term, medium-term, or long-
Goal: term funds.
- make money  Long-term
- add value for the owners - Growth in the market value of the
equity shares through maximization
Types of Financial Decisions of the firm’s market share and
1. Investment Decisions – those which sustained growth in dividend to
determine how scarce or limited shareholders.
resources in terms of funds of the - Survival and sustained growth of the
business firms are committed to firm.
project. Responsibilities to achieve the Financial
- Considers the profitability of each Objectives
individual project proposal that will
contribute to the overall profitability  Investing
of the firm and lead to the creation of - Evaluation and selection of capital
wealth. investment proposal
- Weighing of risks; investee must be - Determination of the total amount of
stable funds that a firm can commit for
2. Financing Decisions – assert the investment.
mixed of debt and equity chosen to - Prioritization of investment
finance investments should alternatives
maximize the value of investments - Determination of fixed assets to be
made. acquired
 Considers the cost of finance - Asset replacement decisions
available in different forms and the  Maximization of the use of
risks attached to it. fixed assets
3. Dividend Decisions – concerned - Purchase or lease decisions
with the determination of:
- Restructuring reorganization mergers
and acquisition
 Financing
- Determination of the financing
pattern of short term, medium-term,
and long-term funds requirements
- Determination of the best capital
structure or mixture of debt and
equity financing
- Arrangement with bankers, suppliers,
and creditors for its working capital,
medium-term and long-term fund
requirements.
 Operating
- The level of cash, securities, and
inventory that should be kept on
hand.
- The credit policy
- Source of short-term financing
- Financing purchases of goods

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