Chapter 1 Flashcards
is an area of financial decision-making harmonizing individual motives and enterprise goals.
Financial Management
It is mainly concerned with the effective fund management in business.
Financial Management
deals with the procurement of funds and their effective utilization in the business as an application of general managerial principles in financial decision-making.
Financial Management
the art and science of managing money
Finance
study of how to make good decisions that involve money.
finance
Functions of finance
Analysis
Decision Making
how a firm should make good financial decisions
Corporate Finance
how an individual should make good financial decisions
Personal Finance
How we should make good decisions involving financial investments
Investments and Portfolio Management
It is about how the financial markets should be organized and how financial institutions should be managed in such a way that they provide the most benefit to the economy
Financial Markets and institutions
What are the areas of finance
Corporate Finance
Personal Finance
Investment and Portfolio Management
Financial Markets and Institutions
Public Finance
it is about taxes, spending, balancing the budget, and financing public debt
Public Finance
Importance of financial Management
Improve profitability
Increase the value of the firm
Promoting savings
Financial planning
Acquisition of funds
Proper use of funds
Financial decision
is one of the emerging areas which provides immense opportunity to finance and economical areas
Economics
records the financial information of the business
Accounting
modern approaches of the financial management applied large number of mathematical and statistical tools and techniques. They are also called as
Econometrics
It is the operational part of the business which helps to multiply the money into profit
Production Management
produced goods are sold in the market with innovative and modern approaches.
Marketing
Financial management is also related to human resource department which provides manpower to all the functional areas of the management
Human Resources
Scope of financial management
Economics
Accounting
Mathematics
Production Management
Marketing
Human Resources
Functional Areas of modern financial Management
Determining financial needs
Choosing the sources of funds
financial analysis and interpretation
Cost-volume-profit analysis
working capital management
Dividend Policy
Capital Budgeting
Financial manager should determine the financial needs of the business
Determining financial needs
institution that can provide long-term funds
Choosing the sources of funds
profitability, liquidity, short-term and long-term financial position of the business
Financial analysis and interpretation
Fixed costs, variable costs, and semi-variable costs have to be analyzed
Cost-volume-profit analysis
part of the firm’s capital which is required for financing short-term assets such as cash, receivables, and inventories.
Working Capital Management
Estimating the financial viability of capital investment over the life of the investment
Capital Budgeting
Organization of the finance functions
Investment Decision
Financing Decision
Dividend Decision
it relates to the selection of assets in which funds are invested by the firm
Investment Decision
two categories of investment decisions
Long term assets
short term assets
yield a return over a period of time in the future
Long term assets
convertible into cash in the normal course of business, usually within a year.
Short term assets
decisions as to how to raise the funds to pay for investment in assets. It determines the best financial mix of the firm.
Financing Decisions
two types of financing decisions
Capital Structure theory
Capital structure decisions
decisions as to how much, how frequently, and in what form to return cash to owners
Dividend decisions
Objectives of financial Market
Profit maximization
Wealth Maximization
It aims at maximizing the profit of the business
Profit Maximization
one of the modern approaches that involves the latest innovations and improvements in the business.
Wealth Maximization
It is also known as value maximization or net present worth maximization
Wealth Maximization
is forward-looking and based on cash flows
Financial Management
historic in nature and focuses on profit rather than cash
Financial Accounting
concerned with raising funds and providing a return to investors
Financial Management
primarily concerned with the provision of information for management to assist it in making decisions within the company.
Management Accounting
