financial management

• five scopes of financial management :

  anticipation

  acquisition

  allocation

  appropriation

  assessment
• Financial Management is mainly concerned with using efficiently the important economic resources of a firm like its capital funds
• Financial management focuses on interpreting accounting data and implementing strategies based on the data presented
• It answers questions such as “how to raise capital?”, “how to allocate available funds”, and “what strategy can be adapted?”
• Financial managers have various and changing roles in today’s business environment
• The modern financial manager plays a crucial role in the effective management of the company
• Financial Management differs from Financial Accounting in that it focuses on interpreting data and applying strategies to address issues about the interpretation of the data
• Financial Management is the application of decision-making skills in interpreting the data provided by Financial Accounting
• Financial Management makes a huge impact in determining what kind of investors a company will attract and the direction of the company in the future
• Financial Management involves efficient and effective planning and controlling of financial resources to maximize profitability and ensure proper resource management
• Financial Management is crucial for an organization's structure, from recording financial transactions to future planning and decision-making
• Financial Management is closely tied to other business functions such as Economics, Accounting, Mathematics, Production Management, Marketing, Personnel, Top Management, Quantitative Methods, Costing, Law, Taxation, Treasury Management, Banking, Insurance, and Information Technology
• Scope of Financial Management:

  • Anticipation involves estimating a firm's needs and income
  • Acquisition is about procuring required capital or finance from different sources
  • Allocation determines where finances will be spent
  • Appropriation involves deciding how profits will be divided among stakeholders
  • Assessment controls the financial activities of a company
• Functional Areas of Financial Management:

  • Determining sources of funds from investors, sales, or third-party resources
  • Financial analysis interprets a firm's financial position and operations
  • Optimal Capital Structure determines the best mix of debt and equity
  • Cost-Volume-Profit Analysis studies the relationship between cost, volume, and profit
  • Profit Planning and Control ensures stability and growth
• Fixed Assets Management:

  • Involves capital expenditure decisions and long-term commitments
  • Decisions regarding fixed assets should be taken with caution as funds used won't be available for current operations
• Capital Budgeting:

  • Crucial decisions related to the judicious allocation of capital
  • Forecasts returns on long-term investments and compares profitability with the cost of capital
• Working Capital Management:

  • Working Capital = Current Assets - Current Liabilities
  • Working capital is essential for keeping business operations running smoothly
• Dividend Policies:

  • Crucial for maintaining financial health and maximizing the value of the firm
  • Balances the interests of stockholders and the firm's financial management
• Acquisitions and Mergers:

  • Firms expand externally through acquisitions or mergers
  • Acquisitions involve purchasing or leasing smaller firms, while mergers require careful valuation and control
• Financial Decision-Making:

  • Involves controlling cash flows, acquisitions, and expenditures
  • Addresses investment decisions, financing decisions, dividend decisions, and liquidity decisions
• Ten Axioms of Financial Management:

  • Includes principles like the Risk-Return Trade-off, Time Value of Money, and Cash Flows is King
  • Also covers Efficient Capital Markets, Taxes Bias Business Decisions, and Ethical Behavior
• Goal and Objective of the Firm:

  • Profit Maximization focuses on short-term profits within a year
  • Wealth Maximization is a long-term goal that considers future profits and sustainability
• financial management concern is the efficient use of economic resource of a firm
• Financial management is the interpretation of data and how to make strategies
• main features of financial management:

  analytical thinking

  continuous process

  Basis of managerial decisions

  centralize nature

  Maintaining balance between profit and risk

  Coordination between process
• Analytical thinking financial problems are analyze.
• Analytical thinking The study of trends in actual figures and ratio analysis
• Continuous process makes managers busy all year
• Basis of managerial decision because All managerial decisions relating to finance are taken after considering the report prepared by the finance manager
• the Basis of managerial decision is the base managerial decision
• Centralized Nature- Financial management is of a centralized nature. Other activities can be decentralized but there is only one department for financial management
• Financial management is different from accounting because accounting records business transaction while financial management is the one who interprets the data being reported, Asset management
• Financial management reports involve right mix of fund allocation, decision making about the firm