Financial Management Flashcards
Importance of Financial Management
Ranbir kapoor gets VIP bag to manage his finances like money, shares, gold etc.
1. Size and Composition of Fixed Assets - He buys a fixed ass and measures its size and composition as he has to take the ass inside a bus.
2. Quantam of Current Assets and its Break-up into Cash, Inventory and Receivables - The size of the ass is too big so he applies current and breaks the ass into smaller pieces, cash and inventory of boxes also fall out.
3. Amount of Long-Term and Short-Term Funds to be Used - He takes the ass to a meat shop and wants long pieces to use for fillets and short pieces to use for popcorn. He says he will transfer funds.
4. Break-up of Long-Term Financing into Debt, Equity etc. - The butcher says he can’t cut small pieces, only long ones. Ranbir agrees but it costs so much he goes into debt, and he has to sell all his equity.
5. Items in the Profit and Loss Account - Once he exits the shop he sees professor fitness (prof-fit). Ranbir asks him to fix the ass, and he counts to 3 and does so saving Ranbir from loss.
Factors Affecting Capital Budgeting Decision
Ranbir wants to open a factory for hard-hat caps and budgets some money for the same.
1. Cash Flows of the Project - He goes to the sun temple and prays for cash flow for the project.
2. Rate of Return - In return, s__hoes start dropping from above with rats scurrying from inside.
3. Investment Criteria Involved - He goes outside angrily and sees a tree under which there is a cafeteria. He goes inside the cafeteria, and sits on a table and planes his investment more properly.
Factors Affecting Financing Decision
Ranbir Kapoor goes to finance minister with a proposal for his factory on a dish. He opens the dish cover to open a mini-working factory.
1. State of Capital Markets - The minister sends his team of assistants to states where flourishing cap markets are present, to study about them.
2. Cost - The first assistant goes to a dessert state where there is a single cap shop. He asks the cost of the caps.
3. Floatation Costs - He says one is floating whose cost is Rs. 10 lakh.
4. Fixed Operating Costs - He says he also has a cheaper fixed cap whose cost remains fixed at Rs. 1 Lakh. He says surgeons use these caps during operations so that the patient remains fixed.
5. Risk - He asks about the various risks associated with the caps, to which the shopkeeper says that the floating cap may float away. A floating cap then floats away from his shop.
6. Control Consideration - The shopkeeper acts fast and takes out a remote control by which he puts the floating cap on the assistant’s head.
7. Cash Flow Position of Business - The assistant, impressed, tells the minister. The minister calls Ranbir and hands over a bag of glow cash which Ranbir takes home in a bus, sitting in an upside down position.
Factors Affecting Dividend Decision
There is a divided gold dish of which Ranbir Kapoor is holding one half in one hand and the other in the other hand.
1. Amount of Earnings - He throws the gold dishes in a shopping trolley which already has amount of earnings and earings.
2. Stability of Earnings - He takes the trolley to a horse stable, and hides it inside one of the horses.
3. Taxation Policy - Tax people hear that he is hiding money and come with police to his stable.
4. Legal Constraints - Ranbir’s legal team arrive with ice-cream cones in a bullet train. (cones-strain)
5. Contractual Constraints - Ranbir signs a contract which allows him to go free, and he then fills the cones with earrings and money. Everyone takes the cones and goes via train.
6. Access to Capital Markets - Ranbir goes to cap market and invests rest of money, betting on a fight between two caps.
7. Stock Market Reaction - His cap wins the fight and the TV screen that shows the stock market reacts upward.
8. Growth Opportunities - He goes to the bookie to collect his money which has grown two-fold.
9. Stability of Dividends - He decides to go back to his stable and divide the money notes into half.
10. Shareholder Preference - His shareholders come and say that they’d prefer if he didn’t just waste the money like that.
11. Cash Flow Position - His cash flow position quickly starts detoriating as the shareholders grab the money and run.
Importance Of Financial Planning
Finance Minister takes out planner from VIP inside his house.
1. Forecasting - He puts on the TV to see a weather forecast channel playing. Sunny weather is forecasted.
2. Helps in Avoiding Business Shocks and Surprises - He gets shocked and surprised to see that it starts raining as soon as he exits his house.
3. Co-Ordination - Wind starts blowing very strongly, and his turban starts untangling. He quickly takes a chord and ties his turban to his head.
4. Detailed Plans of Action - He thinks about the possible action plans he can execute.
5. Detailed Objectives - He sees a Gazebo (object) far away and runs towards it. Inside he sees an object. Upon detailed inspection he realises that its a giant gold statue of himself.
6. Link Between The Present and Future - He remembers that he financed Ranbir and relaises the link between the present and future.
7. Link Between Investment and Financing Decision - He looks at the cap on the statue and thinks whether his investment decision was correct and whether he should finance Ranbir’s other projects.
Factors Affecting the Choice of Capital Structure
Ranbir Kapoor goes to a steel cap-shaped structure, which is his new house. He exits to a lush green backyard.
1. Cash Flow Position - He looks up to see the sun and starts praying for it to give cash to him. The sun starts a steady cash flow.
2. Interest Coverage Ratio - The media gets news of this and reports start peeping into his backyard using shoes with springs. With interest they start coverage.
3. Debt Service Coverage Ratio - All the people who served debt to Ranbir also come and climb a tree using binoculars. The tree provides them with good shade and coverage.
4. Return on Investment - They jump down and knock at Ranbir’s door asking him to return their investment.
5. Cost of Debt - Ranbir comes back with a knife and ask whether they still want the cost of his debt, or whether their life costs more.
6. Tax Rate - Smelling vicks, tax people come to raid Ranbir’s house wanting to recover their tax at rate of 200%.
7. Cost of Equity - Ranbir, knowing this, quickly goes to his oven to take out his costly equity shares.
8. Floatation Costs - Ranbir puts his shares and money on a steel plate and makes it float on an open waterpipe on his window.
9. Risk Consideration - The pipe leads to Ranbir’s car’s boot. He drinks some wine and shuts the boot, then drives his car very riskily.
10. Flexibility - There is a hen on his car’s dashboard which he feeds some grains too. The hen suddenly starts doing yoga showing it is very flexibile.
11. Control - He stops at a barn and the hen quickly runs, to which he responds by using a remote control fixed on two sticks.
12. Regulatory Framework - He stops chasing the hen and enters the barn to see a swan. When he turns on the fan’s regulator, the swan starts flying and crashes into a photo frame and becomes a work of art.
13. Stock Market Conditions - The painting turns into a TV, and news channel turns on showing stock market conditions. Ranbir’s stocks have plummetted and he gets a heart attack.
14. Capital Strucutre of Other Companies - Ranbir falls down to a chair, and sees cap structures of other companies rising, and his own falling (represented by caps stacking on top of each other on top of buildings).
Factors Affecting the Requirement of Fixed Capital
Ranbir comes out of a factory where fixed hard-hat caps are required to be worn at all times. He is fascinated by the fixed caps and wants to use them in his next shoot. He goes to his shoot in nature wearing the same.
1. Nature of Business - In nature, everything is fixed and buses are fixed in the air instead of clouds.
2. Scale of Operations - He tries to remove the cap on his head but it doesn’t budge. He goes to a surgeon who says it has to be operated on by a scale.
3. Choice of Technique - The surgeon points to his scalpel and asks Ranbir whether he wants to choose laser or scalpel.
4. Technology Upgradation - Ranbir chooses laser, and the surgeon taps on the scalpel once and upgrades into a high-_tech_ light blue laser.
5. Growth Prospects - During the surgery, while using the laser, Ranbir wakes up and suddenly grows due to side effects.
6. Diversification - He grows so much that a diversion is created in the room’s walls. Eventually he cracks through the entire hospital.
7. Financing Alternatives - On coming out, he says three finance ministers and thinks who he should choose as a financing alternative.
8. Level of Collaboration - Manmohan singh climbs with a giant ladder to the level of Ranbir’s collar and hops on his shoulder.
Factors Affecting the Working Capital Requirements
Ranbir is working very hard on his sculpture of working cap. He wants to make a factory that makes these sculptures for him.
1. Nature of Business - He goes in an orange bus to go see nature.
2. Scale of Operation - As the bus driver breaks, Ranbir holds on to a handle to realize that it is a scale. He gets flashbacks of his operation.
3. Business Cycle - He quickly runs down from the bus and decides to make his own bus using a bunch of cycles.
4. Seasonal Factors - He drives his bus over a cliff into the sea. His dad sees his son drowining, and saves him. He tells Ranbir that he will setup a factory for him.
5. Production Cycle - Production of cycles starts in Ranbir’s new factory and cycles start coming out one by one.
6. Credit Allowed - He lends the cycle on credit basis and allows a lot of credit to a mafia boss.
7. Credit Availed - When he goes and tries to avail his credit, he gets beaten up and sent to the hospital.
8. Operating Efficiency - An operation is necessary to keep Ranbir alive. The surgeon operates on Ranbir using a fish.
9. Availability of Raw Material - Once he gets up, the doctors tell him to only eat raw material like sushi and sashimi. He goes to the shop and sees that sashimi is not available.
10. Growth Prospects - He gets very angry and grows to double his height, towering over eveyrone else.
11. Level of Competition - He sees a TV behind the butcher which shows a boxing competition. He thinks of competing with boxers.
12. Inflation - He goes to the boxing ring and while standing outside, he inflates his muscles using an air pump.
