intro i m pandey
TRANSCRIPT
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I. M. Pandey, Financial Management,9th ed., Vikas. 1
Apna Sapna Money-Money
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By-Rahul Jain
Nature of Financial
Management
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COURSE GUIDELINES
Introduction and Basics of Financial Management
Sources of funds
Capital budgeting & structure
Marginal cost analysisRatio analysis
Budgeting & Financial Planning
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Aim of the Module
identify different sources of raising funds
for an enterprise and methods of
deploying them
understand how capital structure is
planned and executed
To Know about the viability of project.
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Our Strategy for achieving these
Objectives?
Concepts, Cases and Class Discussion
Punctuality, Participation and Preparation
(Its compulsory to bring your own calculators, Pen,Stationary, Registers, Prescribed Book,Printouts of the Intranet documents- Otherwisenecessary disciplinary action will be taken)
Judgment challengeLearning to communicate ideas
Learning from each other
Learning through discovery
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What is Good
Participation?
Quality, not quantity.
Analyzing and discussing course
material.
Questioning the analysis of others.
Seeking clarification.
Summarizing / synthesizing.
Adherence to guidelines for
professionalconduct.
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Some Important rules
Switch off your Mobiles
Attendance rules will be strictly applied
Non completion of Assignment will lead to strict
disciplinary measuresStudents can gather additional bonus points by being a
Star Performer in the whole course.
Students falling in the Improvement category would be
penalized.If Attendance less than 75% then one grade will be
reduced in respective Viva/Exam/Log Process.
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Learning objectives:
What is financial management?
Difference between financial management
and financial accounting
The goals of financial management !
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Business Activities
Production
Marketing
Finance
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Meaning
Financial managementis a systematic
process that provides the necessary
financial information to help a business
produce and distribute goods and servicesin a way that will maximize wealth.
It also provides feedback about how well
the organization is doing.
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Overview of Financial Management
Dev: A Finance Manager has many responsibilities. He has to manageall the incomes and expenses related to the company. He has to seethat resources are not wasted anywhere. He has to negotiate withthe suppliers. And see that all departments get the money to meettheir expenses.
Ajay:Please tell me more
Dev:Just as the Purchase Manager needs money to buy the rawmaterials, the Production Manager also has to maintain hismachinery so that the production goes on smoothly. This
maintenance also requires money. If Ranjeet does not give therequired funds to either of them, the production will stop. What will
ABC sell, if no textile is manufactured? Financial managementinvolves several functions, especially in bigger companies.
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Overview of Financial Management
Dev:Matching the income and expenditure isnot the only job. Ranjeet has to allocate thecash, but at the same time, he has to see thatequipment, workers, supplies, etc. are also
being used properly. Wastage of any of theseresources will affect the cash balances of ABC.
Using resources efficiently will help ABC toreduce the costs of operations. At the same
time, if resources are used efficiently, it willgenerate additional resources for the company.Ranjeet also has to analyze ABCs financialperformance. If the company is not able to makeprofits, he has to find out the reasons for it.
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Finance Functions
Investment or Long Term Asset Mix
Decision
Financing or Capital Mix Decision
Dividend or Profit Allocation Decision
Liquidity or Short Term Asset Mix
Decision
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Financial accounting and Financial
Management
Financial accounting gives the financial
status of the company to people outside
the company. It is recording and reporting
the activities and events that lead to cashinflow and outflow.
Financial management means efficiently
managing the various resources of thecompany.
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Financial accounting and Financial
Management
Financial accounting aims at maintaining a clearrecord of the financial condition of the firm.
Accounting measures the performance of thefirm so that the situation of the company can bemeasured in financial terms.
Financial management is concerned with valuemaximization. Managements efforts are forincreasing the value of the company for theshareholders. This requires investing in projectsthat are likely to provide positive returns to the
company.
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Financial accounting and Financial
Management
Certainty
Accounting is maintenance of financialrecords. So, it deals with what has already
occurred. This makes it more certain.A finance manager is concerned with what is going tohappen in the future. He takes critical decisions that willaffect the future of the company. These are based on
various calculations and assessments. This is not easybecause there are many uncertainties in financialmanagement.
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Finance Managers Role
Raising of Funds
Allocation of Funds
Profit PlanningUnderstanding Capital Markets
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Financial Goals
Profit maximization (profit after tax)
Shareholders Wealth Maximization
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Profit Maximization
Maximizing the Rupee Income of Firm
Resources are efficiently utilized
Appropriate measure of firm performance
Serves interest of society also
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Objections to Profit
MaximizationIt is Vague
It Ignores the Timing of Returns
It Ignores Risk
In new business environment profitmaximization is regarded as Inappropriate and Immoral.
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Shareholders Wealth
MaximizationMaximizes the cash flow.Accounts for the timing and risk of the
expected benefits.
Fundamental objectivemaximize the
market value of the firms shares.
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Risk-return Trade-off
Risk and expected return move in
tandem; the greater the risk, the greater
the expected return.
Financial decisions of the firm are
guided by the risk-return trade-off.
The return and risk relationship:
Return = Risk-free rate + Risk premium
Risk-free rate is a compensation for
time and risk premium for risk.
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Managers Versus
Shareholders GoalsA company has stakeholders such as employees, debt-holders, consumers, suppliers, government and society.
Managers may perceive their role as reconciling conflictingobjectives of stakeholders. This stakeholders view of
managersrole may compromise with the objective of SWM.Managers may pursue their own personal goals at the cost ofshareholders, or may play safe and create satisfactory wealthfor shareholders than the maximum.
Managers may avoid taking high investment and financingrisks that may otherwise be needed to maximize
shareholders wealth. Such satisfying behaviour ofmanagers will frustrate the objective of SWM as a normativeguide.
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Financial Goals and Firms
Mission and ObjectivesFirms primary objective is maximizing the welfare ofowners, but, in operational terms, they focus on the
satisfaction of its customers through the production of
goods and services needed by them
Firms state their vision, mission and values in broad
terms
Wealth maximization is more appropriately a decision
criterion, rather than an objectiveor a goal.
Goals or objectives are missions or basic purposes of a
firmsexistence
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Financial Goals and Firms
Mission and ObjectivesThe shareholderswealth maximization isthe second-level criterion ensuring that
the decision meets the minimum standard
of the economic performance.
In the final decision-making, the
judgement of management plays the
crucial role. The wealth maximizationcriterion would simply indicate whether
an action is economically viable or not.
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Interview Exercise
Meet Owner/Manager of an Organization:
Find following:
1) About the Organization and its USP.2) Important financial decisions that his
organization is taking.
3) Challenges faced.4) Sources of Revenues and Top three
costs.
5) Future Plans of Expansion. 27
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Learning Tools
Website
www.learningfinancialmanagement.pbworks.com
Phone: 9811228852
Email: [email protected]
Text Book:
Financial Management , I.M. Pandey, Vikas
Publications28
http://www.learningfinancialmanagement.pbworks.com/http://www.learningfinancialmanagement.pbworks.com/ -
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Assignment
Prepare an individual file having :
a) Key learnings of Class-1
b) Summary of any Fashion Business News
Read Chapter 1 of the Book. (I.M. Pandey)
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