Introduction of financial management

1. Introduction to Financial Management
Prepared By : Mohd Samim Faizy

2. What is finance ?
A branch of economics concerned with
resource allocation as well as resource
management, acquisition and investment.
“Finance deals with matters related to
money”
“To raise money through the issuance and
sale of debt owner equity”

3. “To provide or raise the funds of capital”
finance = Equity + Debt
So, finance is the combination of equity and
debt.

4. What is financial Management
The planning, directing, monitoring, organizing,
and controlling of the monetary resources of an
organization.
• It is an area of finance dealing with financial
decision business enterprise make and the tools and
analysis used to make this decision.
• financial Management can be defined as:
The management of the finances of a business
organization in order to achieve financial objectives,

5. The key objectives of financial
management would be to:
• • Create wealth for the business
• • Generate cash, and
• • Provide a sufficient return on investment
bearing in mind the risks that the business is
taking and the resources invested.

6. Three elements of financial management
1. Financial Planning:•
Management need to ensure that enough funding is
available at the right time to meet the needs of the
business.
• In the short term, funding may be needed to invest in
equipment and shares, pay employees and fund sales
made on credit.
• In the medium and long term, funding may be required
for significant additions to the productive capacity of
the business or to make acquisitions.

7. 2. Financial Control:• Financial control is a critically important activity to help
the business ensure that the business is meeting its
objectives. Financial control addresses questions such as:
• • Are assets being used efficiently?
• • Are the businesses assets secure?
• • Do management act in the best interest of shareholders
and in accordance with business rules?

8. 3. Financial Decision-making: The key aspects of financial decision-making relate to
investment, financing and dividends:
 Investments must be financed in some way – however
there are always financing alternatives that can be
considered. For example it is possible to raise finance
from selling new shares, borrowing from banks or
taking credit from suppliers.
 A key financing decision is whether profits earned by
the business should be retained rather than distributed
to shareholders via dividends. If dividends are too high,
the business may be starved of funding to reinvest in
growing revenues and profits further.

9. Three area of finance

10. 1. Capital Budgeting:It is the planning process used to determine
whether a form’s long term investment. i.e. new
machinery, replacement of machinery, new plans,
research and development project etc.
“Value of cash flow generated by an assets should be
greater than the cost of that assets”
“Note only how much cash expected to receive but also
when and how”

11. 2. Capital Structure:It refers to the way a corporation finances its assets
through some combination of equity and debt.
It is the mixture of long term debt and equity.
First goals Mixture will be effect both the risk and the
value of the form.
2nd goals
What are least expensive sources?
Debt comes in the form of bond issues or long-term
notes payable, whereas equity is classified as common
stock, preferred stock, or retained earnings. Short-term
debt such as working capital requirements also is
considered part of the capital structure.

12. 3. Working Capital Management:It refer to the short term assets and short term
liabilities. In short we can say that “day
to day activities”
In working capital management, we only study
about the current assets and current liabilities.