Introduction to FinMan (Until 10 Axions) Flashcards
This is mainly concerned with using efficiently the important economic resources of a firm like its capital funds.
Financial Management
What differs financial management from accounting?
FinMan is more concerned with the decision-making regarding the allocation of the business’ capital funds.
What are the main features of financial management?
Analytical Thinking
Continuous Process
Basis of Managerial Decisions
Maintaining Balance between Risk and Profitability
Coordination between Processes
Centralized Nature
This involves the efficient allocation of available resources within a firm.
Asset Management
What is said to be the language of finance?
Accounting
These are modern approaches to financial management that applies a large number of mathematical and statistical tools and techniques.
Econometrics
What are the two important functions of top management?
Strategic Planning
Management Control
What do you call these methods: linear programming, probability, discounting techniques
Quantitative Methods
This is considered a profit center
Treasury operations
What are the 5 A’s of the scope of financial management?
Anticipation
Acquisition
Allocation
Appropriation
Assessment
This is the evaluation and interpretation of a firm’s financial position and operations and involves the comparison and interpretation of accounting data.
Financial Analysis
This is popularly known as the CVP relationship. It determines the income needed by the firm to cover its variable costs.
Cost-Volume-Profit Analysis
This ensures the attainment of stability and growth.
Profit Planning
This is a dual function that enables one to determine costs it has incurred, and revenues it has earned during a particular period.
Profit Planning and Control
This is rightly an adjunct of fixed capital investment.
Working Capital
What is the equation for working capital?
Working Capital = Current Assets - Current Liabilities
What consists the financial management process?
Financial Planning
Financial Control
Financial Decision-Making
These jobs are generally involved working with corporations, government, and other large institutions giving them strategic advice.
Investment Banking Jobs
These jobs can involve taking orders from portfolio managers or using discretion on what to buy and sell.
Hedge Fund Jobs
These jobs are primarily focused on providing financial services to retail investors.
Financial Advisory Jobs
These jobs incorporate knowledge of finance and economics with the ability to write to speak intelligently about the markets.
Financial Media Jobs
These jobs involve directly managing institutional and retail client portfolios.
Portfolio Management Jobs
These jobs are found in commercial and investment banks, asset management firms, and hedge funds.
Trading Jobs
What are the 10 axioms that form the basics of financial management?
- The Risk-Return Trade Off
- The Time Value of Money
- Cash Flows is King
- Incremental Cash Flows
- The Curse of Competitive Markets
- Efficient Capital Markets
- The Agency Problem
- Taxes Bias Business Decisions
- All Risks are not Equal
- Ethical Behavior is Doing the Right Thing
This is a short-term goal to maximize profits within a given period.
Period Maximization
This is a long-term goal that considers wealth for the long term, risk or uncertainty, the timing of returns and the stockholders’ return.
Wealth Maximization
What are the 10 axioms?
In this regard, Financial Management
is related to _________ in the sense that the decision of a financial manager must also be
taking into consideration the economic environment in which the business exists.
Economics
The firm’s finance and __________ activities are closely related and generally overlap.
_______________ is sometimes said to be the language of finance because it provides financial data through
income statements, balance sheets, and the statement of cash flows.
Accounting
Economic order quantity, time
value of money, cost of capital, capital structure theories, dividend theories, ratio analysis, and
working capital analysis are used as tools and techniques in the field of
financial management. What business function does financial management relate with here?
Mathematics
_________________
performance finance, because the production department requires raw materials, machinery,
wages, operating expenses, etc. Important production decisions like make or buy can be taken only
after financial implications have been considered.
Production Management
_____________ strategies such as holding inventories to provide uninterrupted service to
customers to increase sales are a cost of a firm that needs the area of financial management.
Marketing
The provision of wages, salary, remuneration, commission, bonus, pension, and other
monetary benefits has become a major financial decision in the area of human resource
management. What business function does financial management relate with here?
Personnel
Strategic planning and management control are two important functions of _________________. The
finance function provides the basic inputs needed for undertaking these activities.
Top management
______________ methods such as linear programming, probability, discounting techniques,
present value techniques, etc. are useful in analyzing complex financial management
problems.
Quantitative Methods
A finance manager has to understand, plan and
manage costs, through appropriate tools and techniques including Budgeting and Activity-based
_____________.
Costing
Sound knowledge of the legal environment, corporate laws, business laws, Import Export
guidelines, international laws, trade and patent laws, commercial contracts, etc. are again finance
executives in a globalized business scenario. In what business function does financial management relate to here?
Law
Tax planning is an important function of a
finance manager. Some of the major business decisions are based on the economics of ___________.
Taxation
It deals with optimal management of cash flows, judiciously investing surplus cash in
the most appropriate investment avenues, anticipating and meeting emerging cash requirements,
and maximizing the overall returns.
Treasury Management
Thanks to Government’s liberalized
investment norms in this sector, the ________ system has essentially been an important consideration
in financing decisions.
Banking
Evaluating and determining the commercial __________ requirements, choice of products, and
insurers.
Insurance
Now more than ever, the difficult job of valuation of financial
instruments in the past is made easier with the aid of better ______________.
Information Technology
What area of financial management is about the different ways in which a business can procure funds?
Determining sources of funds
This area of financial management involves acquisition of fixed assets and the capital expenditure decisions in the long-term according tot these assets.
Fixed Assets Management
What area of financial management interprets the firm’s financial position and operations?
Financial Analysis
This area of financial management relates tot he allocation of capital.
Capital Budgeting
This area of financial management involves the rules on how the BOD maintains its financial health.
Dividend Policies
This area of financial management consists of the purchase or lease of a smaller firm and the expansion by minimum cash outlay.
Acquisition and Mergers
Under financial management, financial problems are analyzed and considered. A study of the trend of actual figures is made and ratio analysis is done.
Analytical thinking
Previously, financial management was required rarely, but now, the financial manager remains busy throughout the year.
Continuous Process
All managerial decisions relating to finance are taken after considering the report prepared by the finance manager.
Basis of Managerial Decisions
Larger the risk in the business, the larger the expectation of profits.
Balance between risk and profitability
There is always coordination between various processes of the business.
Coordination Between Processes
Other activities can be decentralized but there is only one department for financial management.
Centralized nature
In financial management, estimation of a firm’s needs is important as well as estimating the amount of income that may enter the company. This involves finding our how much finance is required by the company.
Anticipation
Once the required capital or finance is determined by the company, then it must find out how these finances will be procured from different sources.
Acquisition
The collection of a firm’s finances will now be determined by where it will be spent.
Allocation
Upon earning profits, this is the decision of the firm to determine the division of profits.
Appropriation
This control the financial activities of a company.
Assessment
Using the basic accounting equation of Assets = Liabilities + Capital, a firm may be able to determine what level of its capital structure must be achieved for it to perform at a high level.
Optimal Capital Structure
This is popularly known as the ‘CVP relationship’. The financial manager has to ensure that the income for the firm will cover its variable costs.
Cost-Volume-Profit Analysis
This is a dual function that enables one to determine costs it has incurred, and revenues it has earned during a particular period.
Profit Planning and Control
The acquisition of fixed assets involves capital expenditure
decisions and long-term commitments of funds.
Fixed assets management
This involves the working capital equation of “Working Capital = Current Assets - Current Liabilities”. Working capital is rightly an adjunct of fixed capital investment. It is a financial lubricant that keeps business operations going. It is the lifeblood of a firm.
Working Capital management
