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CH 1 FM by DJ Sir

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Arnav Patra
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30 views34 pages

CH 1 FM by DJ Sir

Uploaded by

Arnav Patra
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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CA Darshan Jain

B.Com , CA , CS , DISA , DIRM , LLB(P)

A Chartered Accountant & A Company Secretary By Profession & A


Educator By passion.

Teaching Financial Accounting & Financial Management to CA Students


Since Last 9 years.
MEANING , SCOPE &
OBJECTIVES OF
FM
SR.NO NAME OF TOPIC May-18 Nov-18 May-19 Nov-19 Nov-20 Jan-21 Jul-21 Dec-21 May-22

MEANING , SCOPE AND OBJECTIVES OF


1 FM 4 2 3 4 4 2 2 2

2 TYPES OF FINANCING 6 8 6 4 4 2 4 4 2

3 LEVERAGE ANALYSIS 5 10 10 10 12 10 10 10 10

4 COST OF CAPITAL 10 5 14 5 10 10 5 10

5 CAPITAL STRUCTURE 10 5 10 10 10 5 10 10

6 CAPITAL BUDGETING 28 10 15 20 5 12 12 2 14

7 RISK ANALYSIS IN CAPITAL BUDGETING 4 7 6 3 12 5 5 14 5


SR.NO NAME OF TOPIC May-18 Nov-18 May-19 Nov-19 Nov-20 Jan-21 Jul-21 Dec-21 May-22

8 DIVIDEND DECISION 5 5 5 5 5 5 5 4

ESTIMATION , FINANCING &


9 MANAGEMENT OF WORKING CAPITAL 10 10 10 5 5

MANAGEMENT OF ACCOUNT
10 RECIEVABLES 10 9 5

MANAGEMENT OF CASH , TREASURY &


11 MARKETABLE SECURITIES 10 4 5

12 MANAGAMENT OF PAYABLES

13 MANAGEMENT OF INVENTORY 5

14 RATIO ANALYSIS 5 5 5 5 5 5 10 10 5

TOTAL 72 72 72 74 72 72 72 72 72
BIRDS EYE VIEW
❑ Introduction.

❑ Meaning of Financial Management

❑ Aspects of Financial Management

❑ Evolution of Financial Management

❑ Finance Function Decisions

❑ Importance of Financial Management

❑ Scope of Financial Management

❑ Objectives of Financial Management

❑ Profit Maximization V/s Wealth Maximization

❑ Functions of Finance Manager

❑ Financial Distress & Insolvency

❑ Relationship of Financial Management With Related Disciplines

❑ Agency Problem & Agency Cost


HAVE YOU APPLIED THE CONCEPT OF FINANCIAL MANAGEMENT IN
YOUR LIFE
???
INTRODUCTION
STAGES FOR COMMENCMENT OF BUSINESS
MEANING OF FINANCIAL MANAGEMENT
ASPECTS OF FINANCIAL MANAGEMENT
PROCUREMENT OF FUNDS
CONSIDERATIONS IN PROCUREMENT OF FUNDS

Risk
UTILISATION OF FUNDS
EVOLUTION OF FINANCIAL MANAGEMENT
LONG TERM FINANCE FUNCTION DECISIONS
SHORT TERM FINANCE FUNCTION DECISIONS
Cash

Working
Payables Capital Inventory
Management

Receivables
IMPORTANCE OF FINANCIAL MANAGEMENT
SCOPE OF FINANCIAL MANAGEMENT
OBJECTIVES OF FINANCIAL MANAGEMENT
PROFIT MAXIMISATION
The finance manager has to make his decisions to maximize the profits of the concern. Profit
Maximization, as an objective has the following advantages and limitations.

Advantages Disadvantages / Limitations


Must for survival of business, else Capital is The term “Profit” is vague
lost
Essential for growth and development of Higher the profits, higher the risks involved
business
Impact on society through factor payments Ignore time pattern of the return
Profits-making firms only can pursue social Ignore social and moral obligations of business
obligations

Hence, Profit Maximizations is viewed as a limited objective, i.e. essential but not sufficient.
WEALTH MAXIMISATION
The objective of a firm should be to maximize its value or wealth. Wealth, or value of a firm is
represented by the market price of its shares. Wealth Maximization as an objective has the
following advantages and limitations-

Advantages Disadvantages / Limitations


Emphasizes the long term gains Offers no clear relationship between financial
decision and share price.
Recognizes risk or uncertainty Can lead to management anxiety and frustration

Recognizes the timing of returns


Considers shareholder’s return
FUNCTIONS OF FINANCE MANAGER
1. Fund Requirement Estimation
2. Capital Structure /Finance Decision
3. Investment decisions
4. Dividend decisions
5. Cash Management Decisions
6. Performance Evaluation
7. Financial Negotiations
8. Market Impact Analysis
Fund Requirement Estimation
• The requirement of the funds have to be carefully estimated.
• The purpose of the funds (investment in fixed assets or working capital)and timing of the
funds (when required should be determined).
• This involves the use of the techniques like budgetary control and long range planning.
• This calls for forecasting all physical activities of the organizations and translating them into
money terms.

Capital Structure / Finance Decision


• Funds can be procured from various Sources for the short term and long terms purposes.
• Decisions regarding capital structure (called financing decisions) should be taken to provide
proper balance between (a) long-terms and short-term funds (b) loan funds and own funds
• Long-term funds are required to finance fixed assets & long term investments and to provide
for permanents needs of working capital. Short Terms Funds are required for Working Capital
purpose.
• A proper mix of various sources has to be worked out by the finance manager.
Investment decisions
• Funds procured should be invested/ utilized effectively.
• Long Term Funds should be invested in Fixed Assets / Projects after Capital Budgeting and in
Permanent Working Capital after estimating the requirements carefully.
• Assets management policies should be laid down for Fixed Assets and Current Assets.

Dividend decisions
• The Finance manager assists the top management in deciding as to (a) what amount of dividend
should be paid to shareholder and (b) what amount should be retained in the business itself.
• Dividend Decisions depend upon numerous factors like (a) trend of earnings (b) trend of share market
prices. (c)Requirement of funds for the future growth. (d) cash flow situation. (c) tax positions of the
shareholders.

Cash Management Decisions


• The Finance Manager has to ensure that all sections / branches/ factories / departments and units of
the organization are supplied with adequate funds (cash), to facilitates smooth flow of business
operations.
• He should also ensure that there are no excessive cash idle funds in any division at any point of time.
• For this purpose, Cash management and cash disbursement / transfer policies should be laid down.
Performance Evaluation
• The Finance Manager has to evaluate financial performance of the various units of the organization.
• There are various tools of financial analysis viz. budgetary Control , Ratio Analysis , Cash Flow and
Fund Flow Analysis , Common Size Statement analysis , Intra-firm Comparison etc.
• Financial Analysis helps management to asses how effectively the funds have been utilized and to
identify method of improvement.

Financial Negotiations
• The finance manager is required to interact and carry out negotiations with financial institutions.
banks and public depositors. Negotiations especially with outside financers required specialized
skills.

Market Impact Analysis


• The Finance Manager has to keep in touch with stock exchange quotations and behavior of share
prices.
• It involves analysis of major trends in the stock market and judging their impact of the share price of
the company.
• Value Maximization Objective is achieved through this analysis and action.
FINANCIAL DISTRESS & INSOLVENCY
RELATIONSHIP OF FINANCIAL MANAGEMENT WITH RELATED
DISCIPLINES
AGENCY PROBLEM & AGENCY COST
AGENCY PROBLEM & AGENCY COST
ADDRESSING THE AGENCY PROBLEM

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