FINANCE

• finance is concerned with decisions about money, or more appropriately, cash flows.
• Finance decisions deal with how money is raised and used by businesses, governments, and individuals.
• More value is preferred to less

  2.The sooner cash is received, the more valuable it is

  3.Less risky assets are more valuable than (preferred to) riskier assets.
• GENERAL AREAS OF FINANCE

  Financial Markets and Institutions

  Investments

  Financial Services
• Financial Markets and Institutions

  The success of these organizations requires an understanding of factors that cause interest rates and other returns in the financial markets to rise and fall, regulations that affect such institutions, and various types of financial instruments, and various types of financial instruments, such as mortgages, automobile loans, and certificates of deposit, that financial institutions offer.
• Investments

  This area of finance focuses on the decisions made by businesses and individuals as they choose securities for their investment portfolios. 
• The major functions in the investments area are 

  (a) determining the value, risks, and returns associated with such financial assets as stocks and bonds and 

  (b) determining the optimal mix of securities that should be held in a portfolio of investments, such as a retirement fund.
• Financial services refer to functions provided by organizations that deal with the management of money. Persons who work in these organizations, which include banks, insurance companies, brokerage firms, and similar companies, provide services that help individuals and companies determine how to invest money to achieve such goals as home purchase, retirement, financial stability and sustainability, budgeting, and so forth.
• Managerial finance deals with decisions that all firms make concerning their cash flows, including both inflows and outflows.
• Roles of Financial Managers

  Allocation or Utilization of Funds 

  The financial manager decides as to where to get financial resources like:

  Cash

  Inventories Equipment

  Other Assets needed in operations
• Management of Funds

  The person in charge of the finance function is called the director of finance, VP – Finance, or finance manager.
• He is responsible for the allocation of the financial resources of a company, the acquisition of additional funds needed, and the utilization of these financial resources to attain organizational objectives.
• The finance manager or comptroller supervises :

  The chief accountant, the purchasing manager, the investment manager, the budget and planning manager, the treasury department, and the risk management and insurance department.
• Goals of the Financial Manager

  Acquisition of funds with the least cost from the right sources at the right time;

  Effective cash management;

  Effective working capital management;

  Effective inventory management;

  Effective investment decisions;

  Effective investment decisions;

  Effective investment decisions;
• Inventories need to be managed effectively

  Overstocking is undesirable; it ties up capital.

  Understocking, likewise
• Determining where to invest excess funds to create additional income is making an investment decision.
• Too much cash lying in the bank or checking accounts that do not earn interest are not advisable.
• Any excess cash needs to be invested to earn income, either in the form of interest or dividends.
• Investing in the right assets is a must for successful management of a firm.
• Engaging in new projects and buying new assets are investment activities.
• Proper asset allocation is important.
• Selecting the right machinery and equipment needed by a company in its operation is important to attain its production goal that creates sales.
• Risk management is a task important to the firm to weigh risks associated with certain business decisions.
• Buying stocks or investing in something needs risk analysis and assessment.