CHAPTER- FINANCIAL MANAGEMENT

S.N CONCEPTS KEYWORDS

1 Business Finance  Money required carrying out business activities.
 Finance is required to establish a business, to run it, to expand
it, to modernize it, or to diversify it.
2 Financial Management  It is concerned with optimal procurement as well as the usage
of finance.
 It aims at reducing the costs of funds procured, keeping the
risk under control and achieving effective deployment of
funds.
 It also aims at ensuring availability of enough funds whenever
required and avoiding idle funds.
3 Objective of Financial  To maximize Shareholders’ Wealth.
Mgt.  Shareholders’ Wealth = No. of Equity Shares X Market value
of shares.
4 Poor Financial Decisions  Decisions which result in decrease in M.V. of shares.
5 Decision making is  When out of various available alternatives, the best is selected.
efficient
6  Financial decisions
Investment Decisions  Concerned with decisions relating to investment in assets.
 These decisions include-
 Capital Budgeting Decisions
 Working Capital Investment Decisions
Capital Budgeting  Long term investment decision.
Decisions  Huge amount of Investment
 Irreversible decisions.
 e.g Replace an existing fixed asset, purchase of new fixed
asset.
Working Capital  Short term Investment Decisions.
Investment Decisions  Concerned with the decisions about levels of cash, inventory
and receivables.
 Affect day- to- day working of a business.
Financing Decisions  It is concerned with quantum of finance to be raised from
various long term sources.
 Short term sources are studied under Working Capital
Management.
 Main sources are Owned Funds and Borrowed Funds.

Prepared by-
Shikha Sareen
PGT Commerce (Kendriya Vidyalaya, Jaipur)
  A firm has to decide the proportion of funds to be raised from
either source.
Dividend Decision  It is concerned with how much of the profit is to be distributed
to the shareholders and how much should be retained in the
business.
7 Financial Risk  The risk of default of payment is called financial risk.
8 Floatation Cost  The cost of raising funds is called floatation cost.
9 Financial Planning  The process of estimating fund requirement of a business and
specifying the sources of funds is called financial planning.
 Blueprint of an organisaton’s future operations.
 Proper matching of fund requirements and their availability.
10 Objectives of Financial  To ensure availability of funds whenever required.
Planning  To see that the firm does not raise resources unnecessarily.
11 Capital Structure  It refers to mix between owners’ funds and borrowed funds.
12 Financial Leverage  The proportion of debt in the overall capital is called financial
leverage.
13 Trading on Equity  It refers to the increase in EPS due to use of debt.
CHAPTER- FINANCIAL MARKETS

.No. CONCEPTS KEYWORDS

1 Financial Markets  A financial market is a market for the creation and exchange
of financial assets.
2 Money market  Deals in short term securities maturing in less than one year.
 Treasury bills, Commercial papers, Certificates of Deposits,
Call Money and Commercial bill.
3 Capital market  Deals in long term securities maturing in more than one year
like Equity shares, Preference shares, Debentures etc.
4 Primary Market  Also known as New Issue Market.
 Deals with new securities being issued for the first time.
5 Secondary Market  It is a market for sale and purchase of existing securities.
6 Stock Exchange  It is an institution which provides a platform for buying and
selling of existing securities.
7 Dematerialistaion  The process of holding securities in an electronic form is
called Dematerialistaion.
8 Depository  Depository is like a bank and keeps securities in electronic
form on behalf of the investor.

Prepared by-
Shikha Sareen
PGT Commerce (Kendriya Vidyalaya, Jaipur)
 CHAPTER-MARKETING

S.N CONCEPTS KEYWORDS

o.
1 Market (traditional sense)  Place where buyers and sellers gather to enter into
transactions involving exchange of goods and services.
2 Market (modern sense)  It refers to set of actual and potential buyers of a product or a
service.
3 Marketing (traditional  It referred to as performance of business activities that direct
sense) the flow of goods and services from producers and
consumers.
4 Marketing (modern sense)  Marketing is a social process wherein people interact with
others, in order to act in a particular way, rather than forcing
them to do so.
6 Marketing Activities  Product designing or merchandising
 Packaging, warehousing, transportation, packaging, selling
and distribution, advertising and pricing.
10 Marketing management  Choosing a target market.
 Focus on getting, keeping and growing the customers.
(creating demand)
 Creating and developing superior values for customers.
13  Marketing Philosophies
The Production Concept  Problem was number of producers were limited.
 Focus on production of goods at large scale and reducing
average cost of production.
The Product Concept  Mere availability and low price could not ensure increased
sale.
 Emphasis was shifted from quantity of products to quality of
products.
The Selling Concept  The product quality and availability did not ensure the
survival and growth of firms anymore.
 It was assumed customers will not but unless they are
convinced and motivated.
 Focus on aggressive selling and promotional techniques.
The Marketing Concept  It assumes that in long run profits maximization can be done
by identifying the needs of prospective buyers and
satisfying them.

Prepared by-
Shikha Sareen
PGT Commerce (Kendriya Vidyalaya, Jaipur)
  Focus on Customers’ satisfaction.
 Role of firm is to ‘identify a need and fill it’.
The Societal Marketing  Extension of marketing concept.
Concept  Any activity which satisfies human needs but is detrimental
to the interests of the society cannot be justified.
 Long term welfare of society.
14 Marketing Mix  The Combination of controllable variables chosen by a firm
to prepare its market offering is called Marketing Mix.
 Marketing mix can be described as set of marketing tools that
a firm uses to achieve its marketing objectives in a target
market.
15 Elements of Marketing  Product Mix
Mix  Price Mix
 Place or Physical Distribution Mix
 Promotion Mix.
16 Product Mix  Product means goods or services or ‘anything of value’ or
tangible and intangible attributes of a product which is
offered to the market for sale.
 Product is offered for attention, acquisition, use or
consumption.
17 Branding  The process of giving a name or sign or a symbol etc. to a
product is called branding.
18 Packaging  Act of designing and producing the container or wrapper of a
product.
19 Labelling  Process of indicating and providing detailed information
about the product, its contents, brand name, method of use,
ingredients etc.
20 Price Mix  Price money represents the sum of values that consumers
exchange for the benefit of having or using the product.
 Price may be defined as the amount of money paid by a buyer
in consideration of the purchase of a product or a service.
 Pricing is used as a regulator of the demand of the product.
 Price is the single most important factor affecting the
revenue and profits of the firm.
21 Physical Distribution Mix  It is concerned with making the goods and services
available at the right place, so the people can purchase the
same.
Prepared by-
Shikha Sareen
PGT Commerce (Kendriya Vidyalaya, Jaipur)
  There are two decisions relating to this aspect-
 Physical movement of goods and services from
producers to consumers.
 Channels or intermediaries in the distribution process.
22 Promotion mix  Promotion refers to the use of tools of communication with
the twin objectives of
a) informing potential customers about the product and
b) Persuading them to purchase it.
23  Sales Promotion Techniques
Rebate  Offering products at special prices to clear off excess
inventory. Discount of Rs.10000 for a limited period.
Discount  Offering products at less than list price. E.g. discount upto
50% ot 50+40% discount.
Refunds  Refunding a part of price paid by customer on some proof of
purchase.
 Commonly used by food companies to increase their sales.
 e.g return of empty wrapper etc.
Product combinations  Offering another product as gift along with the purchase of
a product.
 E.g. ½ kg rice with a bag of 5 kg atta.
Quantity gift  Offering extra quantity of the product.
 500 g extra sauce in maggi’s tomato ketchup.
 Buy two get one free.
 Take a 2 night 3 days package at the Hotel and get an extra
night stay at just Rs.100.
Instant Draws and  Scratch a card or burst a cracker and instantly win car,
Assigned Gift computer, refrigerator with the purchase of a TV.
Lucky Draw  Offer of a bathing soap to win gold coin on lucky draw
coupon.
Usable Benefit  Purchase goods worth Rs.3000 and get a holiday package.
 Get a discount voucher for accessories on Apparel purchase
of Rs.1000.
 Get Rs.500 off for movie tickets on purchase of goods worth
Rs.5000.
Full finance @ 0%  Offer easy financing on sale of consumer durable products
like electronic goods or automobiles such as 24 easy
installments.
Prepared by-
Shikha Sareen
PGT Commerce (Kendriya Vidyalaya, Jaipur)
 Sampling  Offer of free sample say free conditioner pouch with bottle of
a shampoo.
Contests  Competitive events to win prizes. like
 quiz or
 application of some skills or
 answering some questions
24 Public Relations  Necessary to manage public opinion and the company’s
relation with the public on regular basis.
 To monitor attitude of public and generate positive publicity.
 Build goodwill of the business.

Prepared by-
Shikha Sareen
PGT Commerce (Kendriya Vidyalaya, Jaipur)