chp 1 Flashcards
what is financial management
concerned with making financial decisions that influence and effect worth of the firm
relates to the creation or sustenance of the economic value of the firm
apa lagi financial management
covers the use of the best methods to evaluate various alternatives and make the best decision thereon
eqn
total assets (non-current assets + current assets) = total liabilities (current + long term) + shareholders equity
Financial management knowledge is important to a firm to answer the following questions:
- what sort of fixed assets should a firm invest in
- how shall firm raise the necessary funding to finance the capital expenditure once a decision has been made (the type fixed assets or business opportunity to invest in?)
- how shall a firm manage its short term operating cash flow)
hierarchies
board of director
other dept. cfo. other dept
treasurer. controller
treasurer duties
- capital budgeting and expenditures
- financial planning
- sourcing and raising funds
- cash management
- credit management
- management of foreign currencies
- risk management
controller duties
- financial statement
- cost and management accounting
- firm taxes
capital budgeting and capital expenditure
employ appraisal techniques such as payback, internal rate of return, and net present value to examine the viability and attractiveness of proposal investments, projects and products
financial planning
contribute in corporate planning and development of financial policy
source and raise funds
plan and raise financing via money markets and capital markets
cash and credit management
look after the firm’s cash needs, banking and management of security system of cash
perform risk management exercise
undertake appropriate risk management in firm
eg price risks may be managed by using financial derivatives such as forward futures option and swaps
role of account manager (SATU)
produce regular financial statements
-statement of financial position
-income statement
-statement of cash flows
role of account manager (DUA)
perform cost and management accounting role
-to provide regular management accounting information
-the planning of monitoring of daily and monthly activities can be performed
role of account manager (TIGA)
comply with taxation requirements
-completing the various tax returns, collection of indirect tax
-remittances (a sum of money sent in payment or as a gift ) of tax revenues to the inland revenue broad -lembaga hasul dlm negeri
role of financial manager (TIGA)
acts as intermediary between the firm’s operation and the financial markets
In whose interests does the firm run?
stakeholders
goal of the firm
maximize the wealth of shareholders
practical reason
biasanyaaa senang ja pun buat investment decision utk firm simple ja tapi kalau ada interest of shareholder d considerkan dia agak complicated la
legal reason
-shareholder are the owners of the firm
-they are protected by the provisions of the companies act, 2016
-finance manager owe some kind of allegiance to the owners of the firm
other goal of the firm
-maximize sales or market share
-minimize cost
-maximize profit
-achieve adequate profits
-ensure continued earnings growth (with minimum % growth targets)
-catch up and overtake competitors
- avoid financial distress and bankruptcy
-survive
-limit working hours and days in a week
-achieve high reputation for product quality and service
-achieve good employer-employee relations
-be environmentally friendly-do not pollute
-be ethical
agency problem
for larger firm, banyak ba shareholder jadi banyak jugak ownership. so nda semua shareholder akan ikut serta manage and running the business. jadi siapa yg manage jawapannya management team
agency relationship / principal-agent relationship
exists when one party (principal) engages with woth another party (agent) act in the agent’s interest
ownership of the firm siapa
shareholder
control management siapa
management team
Agency costs are incurred by the firm, when:
- managers do not attempt to maximize firm value
- shareholder incur costs to monitor the manager and influences their action
potential solution to the agancy problem
- Provisions in the company Act, 2016
- selling share and threat of takeover
- information flow
- linking management remuneration improvement of shareholder’s wealth
