Financial Management INTRODUCTION 3 MAIN BODY3
Added on 2021-02-20
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Financial Management
Table of ContentsINTRODUCTION...........................................................................................................................3MAIN BODY...................................................................................................................................3LO1..................................................................................................................................................31.1 Key Financial Theories:-.......................................................................................................31.2 Strategic implementation techniques:-...................................................................................4LO2..................................................................................................................................................62.1 Nature, elements and importance of Working Capital...........................................................62.2 Working capital needs and strategies of Mazars:-.................................................................72.3 Analysing manner business organisation manage the needs of working capital...................9CONCLUSION..............................................................................................................................10REFERENCES..............................................................................................................................11
INTRODUCTIONFinancial Management is the implementation of basic principles and theories ofmanagement to the financial possessions of an organisation. In other words, Financialmanagement means organising, planning, controlling and directing the financial operations suchas utilization and procurement of funds of the organisation. This study is based on Mazars whichis an independent, international and integrated firm that is specialised in audit, advisory, legaland tax services. This report includes major financial theories that can be used by Mazars. Itevaluates strategic implementation techniques using various portfolio management tools andbalanced scorecard. This study also explains the needs, elements and importance of workingcapital in Mazars. This report evaluates how Mazars assesses and manages their working capitalrequirements for running its operations effectively. Apart from that it determines the analysis orevaluation of financial risks. This study also includes various mitigation techniques that can beadopted by Mazars.. This report ascertains the suitability of techniques applied by Mazars toorganise its global risks.MAIN BODYLO11.1 Key Financial Theories:-The finance theories play an important role in Mazars accounting firm. The financetheories refers to the concept of evaluating the various ways through individuals and businessesraise money, and how this money is apportioned to the project while evaluating the risk factorsrelated with them. There are various key finance theories that offers different approaches toMazars which are explained below:-Modern Portfolio Theory (MPT):-MPT refers to a theory which evaluates the waysthrough which the risk-averse investors can prepare the portfolios to maximise oroptimize estimated return on the basis of predicted level of market risk, highlighting therisk is a fundamental part of higher return or reward. As per this theory, it is possible toprepare an efficient frontier of excellent portfolios providing the maximum estimatedreturn for an expected level of risk(Kim and Zhang., 2016). It is a extension andformalization of diversification in investing, the approach that occupying the various
types of financial assets is less unsafe or as compared to occupying only one type. Its keyconcept is that an asset's return and risk should not be estimated by itself but by the waysthrough which it contributes to overall return and risk of a portfolio.Efficient Market Hypothesis (EMH):-EMH is a financial theory where share pricesindicate all information and constant alpha generation is not possible. Hypothetically,neither fundamental nor technical analysis can adjust excess returns and risks constantlyand therefore only internal information can result in external risk adjustedreturns(Mathuva., 2015). As per this theory, stocks or shares always trade at fair value onthe stock exchanges which makes impossible for the investors of Mazars to either sellshares for inflated price or purchase undervalued shares.Arbitrage Pricing Theory (APT):-APT includes numerous factors of asset pricingmodels on the basis of the concept that the returns of an asset can be estimated byapplying the linear relationship between various macroeconomic variables and the asset'sestimated returns that takes systematic risks(Holm., 2018). It is an essential tool forevaluating portfolios from a value investing approach in relation to determine thesecurities that may be mispriced temporarily. So APT evaluates markets and sometimesmisprice securities before the securities shift back to their fair value and the marketeventually get correct. Fifty Percent Principle:-This theory is a technical improvement that provides 50 to 67% of the most current stock price returns before the price starts advancing again. If ashare currently gain 30% return this principle assumes that it will provide minimum halfof the return or gain before analysing new highs. Generally this theory is implemented tothe short term trends that traders and technical analyst may sell or buy on. 1.2 Strategic implementation techniques:-Every organisation makes various strategies for financing its activities and operation thatare to be implemented in such enterprise on the basis of which all the operations are performedefficiently(Khan and Jain., 2018). Even Mazars also also follows various strategic techniqueswhich are described as below:-Balanced Scorecard (BSC):-BSC is an strategic technique executed to convert the overallbusiness strategy and mission statement of Mazars into quantifiable, significant goals and tocontrol the performance of Mazars in relation to accomplishing these goals. In other words the
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