1.

Discuss the salient features of traditional and modern approach to

Financial Management

Financial management is a set of managerial tasks that deals with the planning and

controlling of a company's financial resources. Which also includes financial decision

making, motivating the employees and making sure the financial goals of the company

are met.

To meet the goals that must be reached through the process there are 2 classified

categories under the FM that illustrate the scope and features. The classic and well-

established strategy is referred to as the traditional approach. A modern method refers

to something that is being utilized as a fresh development.

1. Traditional approach

As per the name we can understand the fact that this is an approach that has been in

use since a long period of time. To begin with, this is an approach that interprets that

the finance function's scope is limited to "money procurement by the corporate

enterprises to meet their financial demands."

Key words: Procurement( Fundraising internally and externally, Identification of source

of finance, determination of them and raising funds are the tasks that must be done

under this factor). where as the internal fund raising refers to institutional arrangement

for financing, through which funds are raised between the firm and its sources of

funding are all interrelated aspects. An external fundraise is getting the fund from the

external stakeholders of the business.

Well just like every other approach in history even this one has its own advantages and

limitations. Therefore the limitations of this approach is that it is confined to get the

confirmation from the ‘procurement of funds” only, which leads to failure of allocation of

funds that causes disturbance in the process.

As the fund is gained from external sources it involves contact with the bankers,

investors and others which also leads to disturbance in internal decision making

accuracy.

2. Modern approach

The modern approach is a method of analyzing a company's financial challenges.

The finance function, according to this concept, encompasses both the procurement of

funds as well as the allocation of funds to various uses. The traditional approach's two

drawbacks are addressed in the modern approach.

This is an approach that answers the question regarding the analysis of the amount of

growth of the firm and how far the growth should be there.

1. How large and how far should a firm grow?

2. In which way should the assets be held. And finally, answers.

3. How should the required funds be raised by the firm?

Through using 3 functions of finance. Investment, financing and dividend decisions.

Investment decision:
The decision and choice which would be made of assets in which a company's assets

will be invested is referred to as an investment decision.

Financial decision:

This is where the determination of the proportion of equity and debt is the main issue in

financing decisions, once the issue is resolved the appropriate fund is raised through

available sources based on the decisions made.

Dividend decision: The decision depends upon the preference of the shareholders and

investment opportunities available to the firm. The choice to pay a dividend has a

significant impact on the stock's market value. As a result, the dividend policy should be

based on the impact on shareholder value. The best dividend policy is one that

increases the value of the company's stock and the wealth of its shareholders.

As mentioned in the PPT, these decisions answer the questions given.

Investment •What business to be in?

Financing •What mix of debt and equity to be used?

Dividend •How much of the profit should be distributed as dividends and how
Decision much should be plowed back
•Can we change the value of the firm by changing the amount of
dividend?
•What should be the mode of dividend payment
Working •What level of inventory is ideal?
Capital •What level of credit should be given to the customers?
Decision •What level of cash should be maintained?
•How can the blockage of funds in the current assets be minimized
without compromising profits?

These are the 2 approaches that support financial management to meet the objectives.

Profit maximization and wealth maximization.

2. Discuss the relationship of financial management to economics and accounting

Financial management

Financial management entails the planning, arranging, directing, and managing of a

company's financial activities, such as procurement and use of funds. It entails applying

general management ideas to the company's financial resources.

Accounting

Accounting is the practice of keeping track of a company's financial activities.

Summarizing, analyzing, and disclosing these transactions to oversight authorities,

regulators, and tax collection entities are all part of the accounting process. Accounting

financial statements are a succinct overview of financial transactions over a period of

time that summarize a company's operations, financial status, and cash flows.

Relationships to Economics: Economics and finance have two important connections.

Microeconomic theory offers the intellectual underpinning for the tools of financial
decision making, whereas the macroeconomic environment determines the context in

which a corporation functions.

To summarise, knowing the environment in which the organisation functions

necessitates a fundamental awareness of macroeconomic concepts, while a solid

comprehension of microeconomic principles aids in honing the tools of financial decision

making.

Finance and accounting are inextricably linked and almost always fall under the purview

of the chief financial officer, as demonstrated. Given this kinship, it's no surprise that

finance and accounting are frequently mistaken for one another, or at the very least

overlap significantly. However, as a finance student, you should be aware of the

differences and connections between the two. The following discussion elucidates the

distinctions and connections between the two.

Keeping Score vs. Maximizing Value: Accounting is concerned with keeping score, but

finance is focused with maximising value. Accounting's main goal is to measure a

company's performance, assess its financial situation, and establish the tax base. The

primary purpose of financial planning is to