Basic areas of financial management PDF

Learning outcomes
Basic areas of financial management
What is corporate finance ?
Who is financial manager and his works?
What are financial management decisions ?
The goal of financial management
Stock price maximization and social welfare
What are the management action to maximize the stock holder wealth ?
Managers act and stockholders interest
Financial management trends
Financial markets
Abstract
Companies from the enormous multibillion multinational to the local shop around the
corner,are largely confronting finance decisions.Whether it is to decide on a specific
investment,to be active on the securities exchange,or for a investment firm,to create the most
ideal portfolio of assets.Each future manager ought to have the ability to get a handle on the
essential corporate finance principles in order to succeed in the business world. hence, in this
chapter there are lots of fundamentals of corporate finance which is useful for all the future
managers to succeed their business.This chapter will cover the Basic areas of financial
management,financial management decisions,goals of financial managers,management
actions to maximize the stockholder wealth,financial management trends and financial
markets.
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01.Basic areas of financial management
Capital markets and financial institution
Investment
Corporate finance
01.1.Capital markets and financial institution
Many finance majors go to work for financial institutions,including banks,insurance
companies,brokerage firms,mutual funds.
Capital markets facilitates the transfer of money between the two parties in an
effective manner
For success here ones need a knowledge of
Valuation techniques(Comps,precedent transactions)
interest rates rise & falls
regulatory environment of the financial institutions
01.2.Investment
A financial investment I any assets or instrument purchased with the intention
of selling said asset for a price higher than the purchase price at some future
point in time
Main function in investment
Sales
The analysis of individual securities
Determining the optimal mix of securities for given investor
01.3. Business finance or financial management
01.3.1. Definition
The determination, acquisition,allocation and utilization of financial resources usually
with the aim of achieving some particular goals or objectives (the ways & means of
managing money)
01.3.2.What is corporate finance?
What long term investment should take on? That is,what lines of business will
you be in & what sorts of building,machinery & equipment will you need
Where will you get the long term financing pay your investment? Will you
bring in other owners or will you borrow the money
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How will you manage your everyday financial activities such as collecting
from customers & paying suppliers [ CITATION Ros \l 1033 ]
Corparate finance broadly speaking I the study of ways to answer these 3 questions
01.3.3.Financial manager
Person who tries to answer some or all of these questions
Vice president of finance coordinate activities of treasurer and controller
The controler’s office handles
Cost & financial accounting
Tax payment
Tax payment
Treasurer office responsible for
Its financial planing
Its capital expenditure
01.3.4.Financial management decisions
Capital budjeting-
The 1st question is concern the firms long term investment
The process of planing & managing the firms long term investment is
called capital budjeting
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Data processing
Internal control
Preparing budjet
Divident disbursement
Insurance or risk management
Figure 1Board of
directors
Chairman of
the board
&CEO
President &
chief operation
officer
Vice president
marketing
vice president
finance
Treasurer Controller
vice president
production