Financial Management Assignment: FIN-5413, EMBA 2019/2020, April 2020

This assignment delves into the core concepts of financial management, examining its integral role in overall management and its evolution into corporate or business finance. It discusses the responsibilities of financial managers, including investment, financing, and dividend decisions, and emphasizes the importance of efficient fund procurement and utilization. The assignment also explores the significance of financial markets in raising funding, highlighting their function as marketplaces for assets like stocks and bonds. It explains how financial markets facilitate capital accumulation and connect entities needing funds with those willing to invest. The role of primary and secondary markets, and different financial markets, is also discussed. The assignment provides a comprehensive analysis of financial management and financial markets.

Running Head: FINANCIAL MANAGEMENT
FINANCIAL MANAGEMENT
Name of the Student
Name of the University
Author Note

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Table of Contents
Answer of Question 1.................................................................................................................2
Financial Management...........................................................................................................2
Answer of Question 2.................................................................................................................4
Financial Market helps in Raising Funding...........................................................................4
Reference....................................................................................................................................6

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Answer of Question 1
Financial Management
Financial management is integral part of the overall management. These days
financial management is also known as corporate finance or business finance. In business
firm, it is concerned with duties of financial managers. The financial management term is
associated with the efficient use of significant economic resources, which includes capital
funds. It deals with the fund’s procurement and their effective utilization in business. It is
operational activity of business, which is responsible for effectively obtaining and utilizing
funds required for the efficient operations. Hence, it is vital for the business in managing its
finances in efficient way (Banerjee, 2015).
In organizations, the managers make effort for minimizing costs of procuring the
finance and then using it in most profitable manner by taking investment, financing and
dividend decisions. The most key job of the financial manager is making investment
decisions of firm. They are required to weigh costs and benefit associated with all the projects
and investment and then decide which among them qualifies to best use the shareholders’
invested money in organization (Jones et al. 2018). These decisions of investment
fundamentally help in shaping what company does and whether it adds value for the owners.
Further, one financial manager decides about the investment that he or she is required make,
then he or she is required to make decision regarding financing it. The large investment
requires company for raising additional money. Hence, the financial manager needs to decide
that whether additional money should be raised from the existing and new owners with the
help of selling more shares or borrowing the money (Berk et al. 2015). The last decision
made by the financial manager is dividend decision. These decisions involve decisions
relating to portion of the profits, which will be distributed in dividend form. The shareholders

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of company always demand for getting higher dividends, while management likes to retain
profits for the needs of the business. Hence, this is considered to be complex managerial
decision (Finkler, Smith & Calabrese, 2018).
Figure 1: Financial Management Scope
It is not possible for corporate sectors to function without understanding significance
of financial management. The goal of business can be achieved through effective
management of finance. The financial management helps in determining company’s
financing requirement and doing financial planning. It also helps in acquiring the required
funds as well as using and allocating the funds in such as way that it leads to operational
efficiency of company (Shapiro & Hanouna, 2019). Further, profitability of company majorly
depends on effectiveness in proper fund utilization. Hence, financial management improves
company’s profitability by strong devices of financial control, for instance ratio analysis,
budgetary control and cost volume profit analysis. Moreover, by achieving higher
profitability of business, it leads in maximizing wealth of investors and nation. It also
promotes saving. Business organization saves money when they earn higher profitability as
well as maximum wealth. The effective financial management promotes and mobilizes
corporate and individual’s savings (Berk et al. 2015).

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Answer of Question 2
Financial Market helps in Raising Funding
Financial markets are the marketplace, which provides avenue for the purchase and
sale of the assets, for instance stocks, bonds, derivatives, foreign exchange and stocks.
Business organization and investors raises their money by the help of financial markets for
growing their businesses as well as making more money. Financial markets allow the entities
for financing themselves with the help of raising capital that can be either by issuing shares or
by issuing debts. It allows them for financing growth of business as well as their projects by
accessing long-term finance in comparison to short-term finance. For the investors, financial
markets offer great opportunities for investing capital that in turn gives dividend and
prospects of the added value in case value of their assets appreciates. This market put the
entities that requires funds in contact with the players who are having money for doing
investment (Ehrhardt & Brigham, 2016).
Financial market can be broken down into primary market, secondary market. When
company itself issues the new shares and then sells them to the investors, it is done on
primary market. Further, after the initial transactions in between company and investors,
shares are traded continuously on the secondary market between the investors without
corporation’s involvement. There are various financial markets and every country has at least
one; however, sizes can vary. Some financial markets are small, while others are big and
internationally known, for instance “New York Stock Exchange”, which on day-to-day basis
trades trillions on dollars. In the world, NYSE is best-known US stock market and largest
market of stock. The other stock market of US includes NASDAQ, AMEX and MSE
(Pilbeam, 2018).

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Financial markets efficiently directs flow of investments and savings in economy in
such as way that it helps in facilitating capital accumulation and goods and services
production. The combination of institutions and well-developed financial markets as well as
diversified array of the financial instruments and products suits needs of the lenders and
borrowers and hence overall economy. The big financial markets that are having various
trading activities provides more liquidity for the market participants in comparison to the
thinner markets with the limited available participants and securities and therefore provides
limited opportunities of trading (Baeck, Collins & Zhang, 2014). Generally, daily
transactions in financial markets are huge. Further, financial markets play most critical role in
the accumulation of the capital and goods and services production. The credit price and return
on investments helps in providing signals to consumers and producers and these signals
directs funds to the businesses, investors, government and the consumers, which would like
to borrow the money with the help of connecting with those who value funds highly or those
who are willing to pay the higher prices to the willing lenders. In the similar way, robust
existence of financial institutions and markets facilitates the international flow of the funds in
between countries. Hence, it can be said that efficient institutions and financial markets tends
to reduce the search and cost of transactions in the economy (Matvos & Seru, 2014).

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Reference
Baeck, P., Collins, L., & Zhang, B. (2014). Understanding alternative finance. The UK
alternative finance industry report.
Banerjee, B. (2015). Fundamentals of financial management. PHI Learning Pvt. Ltd..
Berk, J., DeMarzo, P., Harford, J., Ford, G., Mollica, V., & Finch, N. (2013). Fundamentals
of corporate finance. Pearson Higher Education AU.
Ehrhardt, M. C., & Brigham, E. F. (2016). Corporate finance: A focused approach. Cengage
learning.
Finkler, S. A., Smith, D. L., & Calabrese, T. D. (2018). Financial management for public,
health, and not-for-profit organizations. CQ Press.
Jones, C., Finkler, S. A., Kovner, C. T., & Mose, J. (2018). Financial Management for Nurse
Managers and Executives-E-Book. Elsevier Health Sciences.
Matvos, G., & Seru, A. (2014). Resource allocation within firms and financial market
dislocation: Evidence from diversified conglomerates. The Review of Financial
Studies, 27(4), 1143-1189.
Pilbeam, K. (2018). Finance & financial markets. Macmillan International Higher Education.
Shapiro, A. C., & Hanouna, P. (2019). Multinational financial management. Wiley.