Principles of Financial

Management
Financial Management
- A branch of study concerned with
the procurement, allocation and
efficient management of financial
resources so that the firm can
maximize profit, increase its value
and fulfil it corporate social
responsibility
Major Concern of
Financial Management

1. Procurement of funds
2. Allocation of funds
3. Efficient management of funds
1. Procurement of funds
- Capital must be available at the
least cost when it is needed
2. Allocation of funds
- The objective is to assure that funds
are channelled to activities that are
considered profitable.
3. Efficient management of funds
- Financial manager may create an
investment portfolio
 Responsibilities of the Financial
Manager

Financial Manager
- Title to the person responsible
for financial planning, fund
raising and resource
management
1. Performing financial analysis, forecasting
and planning
2. Making financial management decisions:
1. Investing decisions
-It encompasses choices ranging from
the selection of the firm’s line of
business and its size to the amount of
cash held in bank
2. Financing decisions
-Involves the financial structure of the
firm
3. Dividend decisions
-It involves the timing and the
percentage of earnings to be paid out
in dividends to preferred and common
stock holders.
3. Dealing with the financial markets

4. Daily monitoring of working capital

a. Receipts and disbursement of funds
b. Credit management
c. Inventory control
 Objectives of Financial Management

A. Financial Managers Goals for the

Business
a. Maximization of stockholders wealth
b. Increase the value of the firm observed
through
1. Economic wealth
2. Growth of the business
Objectives of Financial Management

B. Professional Managers Goals for the

Business
 Creation and distribution of product or
service
 Satisfaction of personal objectives
o Profits for owners
o Compensation of workers
o Physic income such as pride in work
o Security, recognition, acceptance
Objectives of Financial Management

C. Economic Goals for the Business

1. Profitability
2. Growth
3. Survival
D. Non-economic Goals for the Business
1. Prestige and popularity
2. Family control
3. Social Consciousness
4. Fulfilment of CSR