FINANCIAL MANAGEMENT

FINANCE

PUBLIC FINANCE

PRIVATE FINANCE

GOVERNMENT INSTITUTIONS FINANCE STATE GOVERNMENTS FINANCE LOCAL SELF GOVERNMENTS NPOS CENTRAL GOVERNMENT

PERSONAL BUSINESS FINANCE OF

BUSINESS FINANCE

BUSINESS FINANCE

SOLE PROPRIETORY FINANCE

PARTNERSHIP FIRMS FINANCE

CORPORATE FINANCE

FINANCIAL MANAGEMENT PRIMARILY DEALS WITH CORPORATE FINANCE

MEANING OF FINANCIAL MANAGEMENT

FINANCIAL MANAGEMENT REFERS TO THAT PART OF MANAGEMENT ACTIVITY WHICH IS CONCERNED WITH THE PLANNING AND CONTROLLING OF FIRMS FINANCIAL RESOURCES FINANCIAL MANAGEMENT IS THE STUDY OF SOURCING, ALLOCATINGAND USING FUNDS IN MOST EFFICIENT MANNER AND ASKING FOLLOWING QUESTIONS: How to source funds? How to allocate them? How to use them?

PRINCIPLES OF FINANCIAL MANAGEMENT

RISK AND RETIRN FINANCIAL MANAGEME NT TIME VALUE OF MONEY CASH FLOW CONCEPT

WEALTH MAXIMISATION

INCREMENTAL CASH FLOW ANALYSIS

SCOPE OF FINANCIAL MANAGEMENT

Modern scope of financial management is divided into three important decisions which may also be called functions of financial management. These are-: Investment decisions Financing decisions Dividend decisions

OBJECTIVES OF FINANCIAL MANAGEMENT

Profit maximization Wealth maximization

PROFIT MAXIMIZATION
Arguments in favour

When profit is the aim of business then profir maximization should be the obvious objective Profitability is the barometer of measuring efficiency and economic prosperity of business enterprise Profits are main source of finance for the growth of business Profitability is essential for fulfilling social goals

Arguments against profit maximization

The term profit is vague and cannot be precisely defined. Does it mean total profit or EPS? Should we take profit before tax or after tax? Should we take operating profit or profits available for shareholders Ignores time value of money Ignores risk factor Profitability is based upon accounting concept It focuses on profit and does not take any step towards maximizing the wealth of shareholders

Profit Vs wealth maximization

Profit maximization

Wealth maximization

It judges the performance of an organization through profits It ignores time value of money It considers accounting profits and not cash flows It takes decisions on the basis of quantitative analysis

It judges not only firms performance but also EPS of shareholders It considers time value of money for finding out present and future value It takes into account cash flows

It does not take any analysis on the qualitative aspect of organization

It considers returns but does not analyze risk attached to it

It takes investment, financial and dividend decisions on the basis of quantitative and qualitative aspects It analyze social and legal aspect of running an enterprise It analyze both risk and return