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    Introduction To Financial Management: by Prof. Divya Gupta

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    Swagatika Mahapatra
    The document provides an introduction to key concepts in financial management. It discusses three important activities for businesses: production, marketing, and finance. It also defines real assets, financial assets, and the three major financial decisions of investment, financing, and dividend policy. The document then explains various finance functions like capital budgeting, capital structure, working capital management, and the goal of maximizing shareholder wealth. It discusses concepts such as risk-return tradeoff, net present value, and the roles of the treasurer and controller in financial management.

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    Introduction To Financial Management: by Prof. Divya Gupta

    Uploaded by

    Swagatika Mahapatra
    24 views17 pages
    The document provides an introduction to key concepts in financial management. It discusses three important activities for businesses: production, marketing, and finance. It also defines real assets, financial assets, and the three major financial decisions of investment, financing, and dividend policy. The document then explains various finance functions like capital budgeting, capital structure, working capital management, and the goal of maximizing shareholder wealth. It discusses concepts such as risk-return tradeoff, net present value, and the roles of the treasurer and controller in financial management.

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    The document provides an introduction to key concepts in financial management. It discusses three important activities for businesses: production, marketing, and finance. It also defines real assets, financial assets, and the three major financial decisions of investment, financing, and dividend policy. The document then explains various finance functions like capital budgeting, capital structure, working capital management, and the goal of maximizing shareholder wealth. It discusses concepts such as risk-return tradeoff, net present value, and the roles of the treasurer and controller in financial management.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    24 views17 pages

    Introduction To Financial Management: by Prof. Divya Gupta

    Uploaded by

    Swagatika Mahapatra
    The document provides an introduction to key concepts in financial management. It discusses three important activities for businesses: production, marketing, and finance. It also defines real assets, financial assets, and the three major financial decisions of investment, financing, and dividend policy. The document then explains various finance functions like capital budgeting, capital structure, working capital management, and the goal of maximizing shareholder wealth. It discusses concepts such as risk-return tradeoff, net present value, and the roles of the treasurer and controller in financial management.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
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    You are on page 1of 17

    Introduction to Financial Management

    By Prof. Divya Gupta

    Three Most Important Activities of a business firm:


    Production Marketing Finance A firm secures whatever capital it needs and employs it (finance activity) in activities, which generate returns on invested capital (production & marketing activities).

    Real and Financial Assets


    Real Assets 1. Tangible Real Assets 2. Intangible Real Assets Financial Assets

    Scope of Financial Management:


    Three major decisions: Investment Decision Financing Decision Dividend Policy Decision

    Finance Functions Include:


    Long Term asset-mix or investment decision Capital-mix or financing decision Profit allocation or dividend decision Short term asset mix or liquidity decision

    Investment Decision
    A firms investment decision involve capital expenditure. A capital budgeting decision involves the decision of allocation of funds to long term assets that would yield benefits in the future.

    Financing Decision
    Financing decision is the second important to be performed by the finance manager. The mix of debt and equity is known as the firms capital structure. Optimum capital structure.

    Dividend Decision
    Profit distribution approach Dividend payout ratio Optimum dividend policy Bonus shares

    Liquidity decision
    A conflict exists between profitability and liquidity while managing current assets. Appropriate current asset.

    Main Functions of a Financial Manager


    Funds Raising Funds Allocation Profit Planning

    Financial Goal:
    Profit maximization Vs Wealth Maximization.

    Objections to Profit Maximization


    Stakeholders It suffers following limitations: It is vague It ignores the timing of returns It ignores risk Example

    Goals of financial management


    The goal is profit maximization Vs Shareholders Wealth maximization. The maximization of wealth of equity shareholders , as reflected in the market value of the equity, appears to be the most appropriate goal of financial management

    Fundamental principle of financial management


    Any decision will lead to a question: will the decision raise the market value of the firm SWM - It means maximizing the NPV of a course of action to shareholders. (Inflation) NPV= PV (Future cash benefits)- PV (initial cash flow) Need for a valuation approach

    Risk Return Trade-off


    Fig.
    Capital Budgeting Decision

    Capital structure Decision

    Risk

    MV of Firm
    Return

    Dividend Decision

    WCM Decision

    Organization of Finance function


    There are, however, many tasks of financial management and allied areas-like accounting-which are specialized in nature and which are attended to by specialists These tasks and their typical distribution between the two key financial officers of the firm, the treasurer, and the controller.

    Thank You!!!

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