y tinamctal amagement

Finamil Mamagement
Acquisitin ALocatin Distibution amd
(finanin)
aeusin (9nveshing deusion) disposal surpus
a)o
(Diidemd dev'sicn)
fnamce working apital
Cost y Capital( smooth runninp aß day Retained Eaigs
Capital Atuchue to -day actut'es) eqwty shase
Leuesage CDebt ".Capital Budgeting holders dividend
(to invest in long
Ateassets 'kund)

a)souhces of finame

On the Basis On the Basis On the Basis

áeneration
"Owns Borowed ( ’ long tem,
fund bund (>5ys) 9ntesmad extermas
Retained ’Loam (shanes, dtbentues)
Easnings -’ Preyena shost ten
lqwity shaht sh Hol ap' (<1y)
holdei's (ap1jat Pubuc (3 nedium Te
daposits (-5ys)
 # Business hiname te<is to th0se manty or kumdA avalabe
for day busines fr day to day ápesahians. 3i indispeMsahle."
Aox suswival and qrowth busines, kos produtin
distibuhin 4 goods &
X meehng day-to-day eapemie.
## Finanial Mamagememt neA to etfiemt arquisithian a
-fiaamie effiient utilisatin hname &effiient
distibuthin disposal suhplus on Smoeth aoaking

9t is caniesmed with phìmal phDusememtas uel as the

RoLES O frNANCIAL MANACakMENT

) size amd lampositim Fixed Assets
i) Amoumt amd Compasihion ment A5ets.
(Quambty % Cunt asels )
tdepemd pan imestiny as wel as finamçal
deisim a comaaly TQets affeites by Qmount s4
EA edit pobiky ' iamasay, inventoy nanap. et

iiy Amoumt Lang term shont -tesm humds.

in break up of Long-telm finaming into Debt, aguiy et
 Enamia Deisien

1) 9nvestmnemt 2) finaminy 3) Dividemd

Decisi en deusiorn Deisí

Yis heloted to have 2nd most impotamt Conwmed with

ihe 7ims und are to be deisismwnde e distibuhn s
unvested im dff. ayets. hnania managemt. surpus hund.
e Related to amt' to be Deddes how mwch
assets <the pofit easmed
usedtrom lon rn soutes.
Should be dishibuted
Appropriate inwest Man on How much among shareholders
-memt propasa. to rase frm wih ¿oue & how muto kept
asidesetained
Both long b shoYt term, main sOyrs: Ouners sund
&borYOw ed fnds
eating.
long tem dedsicsie, This deu'sin
Cspitey Buagehng deisians Borrowed sunds have to should be laken
inyowet huge amowmt aL be pd bak&iyowes
invemint ar ihevesible sk &it alio has the overa
inielest shigatn. okjechveob
Bhort tem deUs ion ie maxiusatcn
worhirg (sp. deisSn inwowes Owner's fumd invowes no 6 shas holds
mvestnet un day-to-day wealH
working busines. commitment.
An jdeal Mm mixes
both eguty and debt
by ixing a saio,
 (IMPORIANCE/SOPE OE
TNNESTOmENI DEasION

AHck lang lem

Risk im Vowed deisicm.
large amt (2emcomesin (deusions camnot
fumd inyolyed dong run) be hevesed)

fachoxs Affecthing 9vestnemt Decisin

’ Cash flow of the Pojet (thee mstbe hguar amount
% cash How)

Retusn n gnyestmemt

’ Snvestment C tevia / ’ Rik Snuoweo.

Factoxs Afeting dhe Finanial Deisien

Cost 2)Risk
(minimum) (Raisen modevate) Smooth
3) ash ow affoyd borou
positiorn. -ed fumnd

consideation 5) loatahian
Cost sue seuihes

Cost ) Atate capita

meet
moYe Ownehhmd
Bom Periad ’ qwtyahaes
’ boowed humd
" Depvessisn Peiod - ’ dubtseuvtits
 factos Aiicting biidens Dston
1) ’ Easmings‘ ’ Dividend t
Btabiity of eang <4 2)
‘ = Dividund
3) > Cash flow Posibion ‘ = D
ovowth,ppovhunites 4)
Ghyowth opp:‘ - pijvidend
-))- = piv
S) tstabiihy dividend 4 - D‘
(
frebeumu shaeholdes 6)
Youmg sharholde = Du
middse das shareholde= D
Aces to Capita maket 4 )
Consi dehat'n
9) ’ eg al Reshrichins
Conathual Conhaintsto)

21) ’btock market Reaction.

# inamcial Plamning means dediding in aduane

how mwh to spemd,n what to spend accosding to
the fumdhat you. dispasal.
Lsng -tem finamja Plami Gpita Budg ehing

Bhort- tesm finanias Planß Budgets

 Objectives af finamalPlam
Toemsn» avalabty To see that the hm
fumds whemwe rdoesnot ause the
these are eQw'red,

mpontamie g hinamial Plamning

1) Makes the fim bettesr eHepaHed to fae the futue.

3) Relps in avoiding Blsines Bho amd sweises

3) Coord'nate Vavious funtins.

4) Propeh ciisahin hinage.eiLturol

5) ink Rresemt with Feure.

6) Gink blw Snuestment &Finamong deusins

1) rnakes wcluetion %atua perommame earies

#Cap'tal otuctune meams the nhonorhan q debt

and eqity used fox fimamun the opehahona f
Buhines.
Capita Ahutuge Deht
Eqwty
 Capital stuchne bwines affes the phofhtobilihj and
tinanua ik Abest capital shuche is the cne wbih.
whih bings hise in th pic q equhy shahes
Finamial leuesage fu to psepotion 4 debt in ths
overaU cpital, ¬qwy.+ Debt
MOHe debt bings moke income fo ownes n the
Capital stuctue a )tu the RoT CRatwm am inveatment)
the compamyis mte tham the sate intesest
charged n Debt.
If " BoI > Int'on Debt
Roz Piefen debt
EBIT
TotaJ investment RoI Iton Debt
PHef. eqwy.
Dwwng the Boom PERIOD we must have nore debt and
les o equity shaes in apitas stuture &
Duing DEPRESSTONwhem umome Y etUm is les we
showld hawe moNe oh e9wty &les% of debt in cap stutre

aitedin (fators Detehmining the lapital Atuche

Detiled
nert pfe
) (ash flow posihidn 2) 9ntest Coverape Ratio
3) Debt bewice Coverage Ratio (DsIR)
5) Cost debt 6) Tax Rate
4) ROT
) Cost of 9wby ) Floatation (asts
9) kisk ansiderah on 10) Ele xibilihy
) Contal ) Reg w/atoy. framework
13) Stok martet Consideratin
14) aprta) styuture other Compaves.
 1) Cash flow Positin ^ s more debt

2) Itrst loverage Ratio

9ntst

IR L Jes borowed bund.

3) Debt sewice Corehage Ratio DsCRSeamed)

DSCR = PAT + depreiatin +Inleest t Nan cashexp writecft
Pueterene Dividemd + Interest + Repayment
DSCE ’ Debt (to be pajd) shigtsn
DsCR Debt

4) ost of Debt = Preter moYe debt

5) Tax Rate ‘ = debt ‘ Tax Rate hfe eqwty
6) lost of Eqwty
As far as EPS is imcxeasing because q debt,
we can incude debt in cap1ta atrutre
EPS L = ÉqwtyHefer)
Btok mnaket Condiin, t Depiesin Pevod = Boowed tund
Bosm Piod = Eqwty shaies

# ned Capital
fixed Capital imvolwes alocatin sf fims capitw to lomp
tesm as ets ox proets
Lapita) Budgching deusinA atyee the growth
&proitabilihy qthe cmpamy
Facos alfe ctinp Requ'vememt a ixed apital :
1) Nahure o Busines mamufacing ‘ xed
capital
Compamy
TYading o. d fined Capita.

) scal¿ 7 operation ‘= fixed cap

3) Techigue puoduciy
capitad 9ntemsive fechnique = ffixed cap
Laboun 9ntemaíve
4) Technology Upgtadation (fast) . ‘ fc
5) Gouwth Prospets ‘ =‘ capital =
6) moe diveesificaton= more fixed apital
3)
1) Avajlabity o finame tes eapitad reg
= more fned capvee.
6) Level of collaboratos
‘ leM fixed cap. ne edoo.
Working Capital (
workin apita'Ne to exces o Cwsemtases
over wemt abwhes. (CA -LL)
3 Nt woYking apitas
(9nveytment n wrmt ( whem CL> CA.
asets which g canmeteal (+) when Cl <CA
into cayh within a yee (netwoykiry Cap nds catey
Cquicity posihon Co)
Factos, affeching workinp apitalt
1) Nre Busi nes 8etad s h o p =Jess woYkiy
OY Trading conwNn apital
wholesaler

2) Btale op erati an 1 =W

3) Busines yde fuw tuatin : Bocm Period =‘ wc.

Depresin Peiod wc

4) Sea na fators : Duing season= W

Off-seasn

S) Tehmology Labow Intesive = wc

Capita 9itemsive = w c .

Produon yde s long = ^ we less wc.

6) Gedit allowed ^Guberd) wsc = w-c.

) Credt Aval t (lsng texm) = les wc.

e) operahrp Efhiiemy ‘
c9) Raww maseval more availablei= working Gap.
io) More Compehihin (^) wi(t)

12) (hYowth
 Factors Atfeching Reguvememt working apitad
Name os fatoy

2) Nahuye g Businem (Mamutatuiny) (Tradiny on wn)

(be2 of psocesiny work) (no produh'on)
2) Scale of operatn ARGE SMALL

3) 8usiness yle Duin Boom Perod Durinp DEPRESSJDw Pei

4) Beasan) factor Peak eascn Off - e a s n
) (redit all: to ustomet Sales on aed't Basis Sales on Cesh Bais'
6) (Yedit awailed Purchase o 'lash Rais'Pur on edit Basis?
from suppies
During nflehan Duing Inflaton Duin DelLaicn
De7rahon
8) arowth Prospect LOw
Leuel campeh'hem Compehsiom‘=‘w'C mp. wC.
Productin yde long yde Bhort yle
21)
operahing (yle LONa SHORT

Raw
mateia
Cash woyk in
Progre%

Debjox stock a
finished produt

Cyed't
sales