Scribd
Upload
31 views15 pages

FM Intro

Financial management is concerned with the management of financial resources and covers decisions with monetary implications, such as investment, financing, and dividend decisions. It involves anticipating financial needs, acquiring financial resources, allocating resources, and managing working capital. While profit maximization and shareholder wealth maximization are goals of financial management, there are arguments that other factors like social welfare should also be considered. Agency problems can arise from conflicts between stakeholders, leading to agency costs. Corporate governance aims to protect shareholder interests through monitoring and control.

Uploaded by

qari saib
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
31 views15 pages

FM Intro

Financial management is concerned with the management of financial resources and covers decisions with monetary implications, such as investment, financing, and dividend decisions. It involves anticipating financial needs, acquiring financial resources, allocating resources, and managing working capital. While profit maximization and shareholder wealth maximization are goals of financial management, there are arguments that other factors like social welfare should also be considered. Agency problems can arise from conflicts between stakeholders, leading to agency costs. Corporate governance aims to protect shareholder interests through monitoring and control.

Uploaded by

qari saib
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 15

Unit: I

 FM is an area of financial decision making,


harmonising individual motives and enterprise
goals.
Weston and Brigham
 FM is the application of the planning and control
functions to the finance function.
Howard and Upon
 FM is the operational activity of a business that is
responsible for obtaining and effectively utilizing
the funds for efficient operations.
Ezra Solomn and Pringle
 Branch of Business Management
 Essence of Managerial Decisions
 Scientific and Analytical
 Continuous
 Pervasive
 Centralised
 Basis of Managerial Process
 Measure of Performance
 Concerned with the management of financial
resources.
 Performs facilitation, reconciliation, and
control functions.
 Covers all decisions having monetary
implications. These decisions may be:
 Investment Decision
 Financing Decision
 Dividend Decision
 Working Capital Decision
Investment Decision
 What business to be in?
 What growth rate is appropriate?
 What assets to acquire?
Financing Decision
 What mix of debt and equity to be used?
 Can we change value of the firm by changing the capital mix?
 Is there an optimal debt–equity mix?
Dividend Decision
 How much of the profit should be distributed as dividends and how
much should be ploughed back
 Can we change value of the firm by changing the amount of dividend?
 What should be the mode of dividend payment
Working Capital Decision
 What level of inventory is ideal?
 What level of credit should be given to the customers?
 What level of cash should be maintained?
 How can the blockage of funds in the current assets be minimized
without compromising with profits?
 Anticipating Financial Needs
 Acquiring Financial resources
 Allocation of Resources
Financial Searching
Management of Planning Financial
Cash Sources

Comparison of
Division of Possible Sources
Surplus
Functions and selection of
Best

Working
Capital
Management Raising
Investment Finance
of Funds
 Profit Maximization
 Shareholder’s Wealth Maximization
Arguments in favour:
 Profit is the test of economic efficiency
 Internal Resource for Expansion
 More Competitive
 Avoid Dilution of Ownership
 Basis of Decision-making
Arguments in against:
 Profit is a vague term
 Overlook Social welfare
 Ignores time value of money
 Narrow outlook
 Short term achievement
 Ignores Risk
 The stakeholders in business are multiple,
their stakes are varied and their objectives
are often conflicting.
 Conflict of interest between the varied
stakeholders causes agency problems.
 To resolve such agency problems monitoring
and control mechanisms become imperative.
 Such mechanisms entail costs that are termed as
agency costs.
 Agency costs take the form of either incentives to
management like bonuses, stock options or
monitoring and control costs like audit fees,
credit rating fees etc.
 Corporate governance is another mechanism to
protect the interest of the shareholders.
 Set of rules, processes, and customs that enable
the effective management of firms in the best
interest of shareholders are termed as corporate
governance.
Proper Financial Management

Higher Profitability, More Production,


Maximization of Shareholder’s Wealth

Growth in GDP

Improvement in Balance of Payment

Economic Growth
Demand Forecasting,
Cost Optimization,
Optimum Production Financial
Economics Function, Break-Even Management
Analysis, Competitive
Pricing

You might also like