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    Financial Management Module 1

    Uploaded by

    Eleine Alvarez
    This document provides an overview of financial management. It defines key terms like finance, management, and financial management. It also discusses the goals of a firm and different forms of business organization like sole proprietorship, partnership, and corporation/company. The advantages and disadvantages of each form are outlined. The financial/cash cycle is explained through a diagram. Finally, it distinguishes the three areas of finance: financial management, capital markets, and investments.

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    © All Rights Reserved
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    Financial Management Module 1

    Uploaded by

    Eleine Alvarez
    46 views38 pages
    This document provides an overview of financial management. It defines key terms like finance, management, and financial management. It also discusses the goals of a firm and different forms of business organization like sole proprietorship, partnership, and corporation/company. The advantages and disadvantages of each form are outlined. The financial/cash cycle is explained through a diagram. Finally, it distinguishes the three areas of finance: financial management, capital markets, and investments.

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    This document provides an overview of financial management. It defines key terms like finance, management, and financial management. It also discusses the goals of a firm and different forms of business organization like sole proprietorship, partnership, and corporation/company. The advantages and disadvantages of each form are outlined. The financial/cash cycle is explained through a diagram. Finally, it distinguishes the three areas of finance: financial management, capital markets, and investments.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    46 views38 pages

    Financial Management Module 1

    Uploaded by

    Eleine Alvarez
    This document provides an overview of financial management. It defines key terms like finance, management, and financial management. It also discusses the goals of a firm and different forms of business organization like sole proprietorship, partnership, and corporation/company. The advantages and disadvantages of each form are outlined. The financial/cash cycle is explained through a diagram. Finally, it distinguishes the three areas of finance: financial management, capital markets, and investments.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 38

    FINANCIAL

    MANAGEMENT

    PREPARED BY:
    MRS. ELEINE T. ALVAREZ
    Instructor
    CLASSROOM RULES
    L
    O
    L
    CLASSROOM RULES
    LOL
    LISTEN
    CLASSROOM RULES
    LOL
    OBSERVE
    CLASSROOM RULES
    LOL
    LEARN
    CLASSROOM RULES
    LOL
    LEARN
    LEARNING CONTENT
    An Overview of
    Financial
    Management
    a.
    OBJECTIVES
    Identify the meaning, concept, goals and
    factors affecting the financial
    management of a business.
    b. Know and distinguished the forms of
    business organization, its advantages
    and disadvantages, and how these affect
    the overall outcome of an enterprise.
    c. Able to sound decision-making for a
    simple to large business type.
    WHAT IS FINANCE?
     the provision of money at the time when it is
    required
     cash flows between capital markets and firm’s
    operations
     refers to the management of flows of money
    through an organization
     It concerns with the application of skills in the
    manipulation, use and control of money
    WHAT IS FINANCE?
     Finance is the life blood and nerve centre of a
    business, just as circulation of blood is
    essential in the human body for maintaining
    life, finance is very essential to smooth running
    of the business. It has been rightly termed as
    universal lubricant which keeps the enterprise
    dynamic. No business, whether big, medium or
    small can be started without an adequate
    amount of finance.
    WHAT IS MANAGEMENT?
     the act or art of managing : the conducting or
    supervising of something (such as a business)
     the act or skill of controlling and making
    decisions about a business, department, sports
    team, etc. (essential meaning)
    FINANCIAL MANAGEMENT?
     According to the Encyclopedia of Social Sciences,
    “Corporation finance deals with the financial
    problems of corporate enterprises. These problems
    include the financial aspects of the promotion of new
    enterprises and their administration during early
    development, the accounting problems connected with
    the distinction between capital and income, the
    administrative questions created by growth and
    expansion, and finally, the financial adjustments
    required for the bolstering up or rehabilitation of a
    corporation which has come into financial difficulties”.
    This Photo by Unknown Author is licensed under CC BY
    This Photo by Unknown Author is licensed under CC BY
    This Photo by Unknown Author is licensed under CC BY-SA (Steve Chen, Chad Harley, Jawed Karim)
    FINANCIAL/CASH CYCLE

    Firm’s (2) (1) Capital


    Operation Financial Markets
    (Real Managers (4a) (Financial
    Assets) (3) Assets)
    (4b)
    FINANCIAL/CASH CYCLE
    (2) (1)

    Firm’s Operation Financial Capital Markets


    (Real Assets) Managers (4a)
    (Financial Assets)
    (3)
    (4b)

    (1) Cash raised by selling financial assets in


    financial markets
    (2) Cash invested in firm’s operations and
    used to purchase real assets
    (3) Cash generated from firm’s operations
    (4a) Cash reinvested in firms’ operations
    (4b) Cash returned to investors
    FINANCIAL/CASH CYCLE
    (2) (1)

    Firm’s Operation Financial Capital Markets


    (Real Assets) Managers (4a)
    (Financial Assets)
    (3)
    (4b)

    Activity (1) Financing decision

    Activity (2) Investment decision

    Activity (4a) and (4b)


    Financing decision
    Finance includes three areas

    1. Financial Management
    2. Capital Markets
    3. Investments
    Financial Management
    Refers to the corporate finance, which
    deals with decisions related to
    how many and what types of assets a
    firm needs to acquire (investment
    decisions), how a firm should raise
    capital to purchase assets (financing
    decisions), and how a firm should do to
    maximize its shareholders wealth (goal
    of
    Capital Markets
    Refers to the study of
    financial markets and
    institutions, which deals with
    interest rates, stocks, bonds,
    government securities, and
    other marketable
    securities. It also covers
    Federal Reserve System and
    its policies.
    Investments
    Refers to the study of
    security analysis, portfolio
    theory, market analysis, and
    behavioral finance.
    Goal of a firm
     must ensure the maximization
    of owner’s economic welfare
     to utilize its funds in a best
    possible and profitable way
     to maximize shareholder’s
    wealth (or firm’s long-run
    value)
    2 Classes of Finance

    LI C PRIVAT
    PUB
    E
    • Government
    institutions
    • State
    governments
    • Local self-
    government
    • Central
    government
    • Personal
    Finance
    • Business
    Finance
    • Finance of
    non-profit
    organizations
    Forms of Business
    Finance/Organization
    Sole Partnersh
    i p
    i et or s hi
    Propr
    p
    a t i o n /
    Corpor
    m pa n y
    Co
    Forms of Business Organization
    • an
    unincorporated
    business owned by
    one individual
    • a single individual
    promotes,
    finances, controls
    and manages the
    business
    enterprise
    Forms of Business Organization
    • an unincorporated
    business owned by
    two or more people
    • an association of
    two or more
    persons to carry on
    as co-owners of a
    business and to
    share its profits
    and losses
    Forms of Business Organization
    • legal entity created
    by a state
    • a legal entity having
    limited liability,
    perpetual succession
    and a common seal.
    A corporation is
    regarded as
    something different
    from its owners
    Advantages
    Sole Corporation /
    Partnership
    Proprietorship Company
     Easy and  Limited
    inexpensive liability
    to form  Easy to
     Subject to transfer the
    less ownership
    government  Unlimited
    regulations lifetime of
     Lower business
    income taxes  Easy to raise
    capital
    Disadvantages
    Sole Corporation /
    Partnership
    Proprietorship Company
     Unlimited  Unlimited  Double
    personal personal taxation (at
    liability liability both
     Limited  Limited corporate
    lifetime of lifetime of and
    business business individual
     Difficult to  Difficult to levels)
    raise capital raise capital  Cost of
    reporting

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