BM financial managment introduction.pptx

financial managment introduction

1. Dr. Ahmed Abdulhaq الإدارة المالية Financial Management

2. Lecture Plan خطة المحاضرة Introduction مقدمة – ( Me and You)-15 minutes Subject Overview نظرة عامة على الموضوع – 25 minutes Important Instructions إرشادات عامة - 10 Minutes Discussion on Topic 1 مناقشة العنوان الأول : The role of Financial Management قواعد الإدارة المالية .

3. Subject Overview – Objectives الاهداف To familiarize the student with the concept of finance and the role financial managers. ان يتعرف الطلاب على مفهوم التمويل ودور المدراء الماليين Recognize the ten different principles of financial management . التعرف على المبادئ العشرة في الإدارة المالية

4. To understand the concept of corporate world, time value of money, financial statements and cash flow, tradeoff between risk and return, difference between simple interest and compound interest, financial ratios and their limitations . فهم مفهوم عالم الشراكة, القيمة الزمنية للنقود القوائم المالية والتدفقات النقدية المفاضلة بين المخاطر والعوائد, التفريق بين الفوائد البسيطة والمركبة , النسب المالية ومحدداتها How to calculate both present value and future value, the value of bonds, and the major financial ratios. كيفية حساب القيمة الحالية والقيمة المستقبلية وقيمة السندات والنسب المالية الرئيسية

5. Subject Overview - Learning Methods منهجية التعلم Lectures (interactive). محاضرات تفاعلية Tutorials ( class exercise) . دورس وتمارين صفية – Problem solving Group (home work) حل المشكلات بصورة جماعية

6. Subject Overview – Assessment التقييم Individual assignments مهام فردية – Class Participation Activities أنشطة المشاركة الصفية (10%) – Mid-term exam اختبار ( 10 %) – Final exam امتحان نهائي ( 6 0%) Group assignments مهام جماعية – Homework اعمال منزلية (20%) Total = 100%

7. Subject Overview – Course Materials Recommended textbook Ross/ Westerfield / Jordan (2010), Fundamentals of Corporate Finance, 9 th Edition, McGraw-Hill/ Irwin, NY, USA ( any edition can be used ). كتاب الإدارة المالية 2015 جامعة الملك سعود للكاتب حمد محمد Other References; (Journals, Reports, Websites, E. Library…etc.) Lecture slides المحاضرات

8. المدير المالي والشركة The Firm and the Financial Manager Dr. Ahmed Abdulhaq

9. Chapter Objectives اهداف الفصل What is Financial Management? ماهي الإدارة المالية 10 principles of financial management. المبادئ العشرة في الإدارة المالية What are the Decisions that Financial Manager must be Concern? ما القرار الذي يجب ان يؤخذ في الاعتبار Dr. Ahmed Abdulhaq

10. The Goal of the Firm. اهداف الشركة Organization of the Financial Management Function. تنظيم وظيفة الإدارة المالية Understand the agency problems. فهم مشاكل الوكالة

11. What is Financial Management? Financial Management  means planning , organizing , directing and controlling the financial activities of the organization. ( الإدارة المالية يعني التخطيط وال تنظيم و ال توجيه و السيطرة على الأنشطة المالية للمنظمة ) Dr. Ahmed Abdulhaq

12. It refers the efficient and effective management  of money (funds) in such a manner as to achieve the goals of the organization. تشير الى فعالية وكفاءة إدارة الأموال بطريقة تؤدي الى تحقيق اهداف المنظمة

13. “It is necessary to understand these principles in order to understand finance.” انه من الضروري فهم هذه المبادئ من اجل فهم التمويل Ten Principles of Financial Management العشرة المبادئ في الإدارة المالية Dr. Ahmed Abdulhaq

14. We won ’ t take on additional risk unless we expect to be compensated with additional return. لن نتحمل مخاطر اضافية ما لم نتوقع التعويض بعوائد اضافية Investment choices have different amounts of risk and expected returns. خيارات الاستثمار لها كميات مختلفة من المخاطر والعوائد المتوقعة The more risk an investment has, the higher its expected return will be. كلما زادت مخاطر الاستثمار كلما زاد العائد المتوقع Principle 1: The Risk-Return Trade-off المبدأ الاول: المفاضلة بين المخاطر والعائد Dr. Ahmed Abdulhaq

15. A Riyal received today is worth more than a Riyal received in the future. الريال الذي نستلمه اليوم اكثر قيمة من الريال الذي نستلمه مستقبلا we can earn interest on money received today, it is better to receive money earlier rather than later. لأننا نستطيع جني الفوائد على الأموال التي نتلقاها اليوم فمن الأفضل ان نتلقى الاموال مبكرا افضل من الاجل Principle 2: The Time Value of Money المبدأ الثاني: القيمة الزمنية للأموال Dr. Ahmed Abdulhaq

16. Cash Flow, not accounting profit, is used as our measurement tool. التدفقات النقدية ليس ربح محاسبيا ولكن أداة للقياس Cash flows, not profits, are actually can be reinvested. التدفقات النقدية ليس أرباحا ولكن في الواقع نستطيع إعادة استثمارها Principle 3: Cash — Not Profits — Is King المبدأ الثالث: النقدية وليس الأرباح هو الملك Dr. Ahmed Abdulhaq

17. The incremental cash flow is the difference between the projected cash flows if the project is selected, versus what they will be, if the project is not selected. التدفقات النقدية الاضافية هي الفرق بين التدفقات النقدية في حالة اختيار المشروع وبين التدفقات النقدية في حالة عدم اختيار المشروع Principle 4: Incremental Cash Flows المبدأ الرابع: التدفقات النقدية الإضافية Dr. Ahmed Abdulhaq

18. It is hard to find exceptionally profitable projects من الصعوب وجود مشاريع مربحة استثنائية If an industry is generating large profits, new entrants are usually attracted. اذا كان مجال الصناعة يجني أرباح واسعة فانه يجذب داخلين جدد في هذا المجال The additional competition and added capacity can result in profits being driven down to the required rate of return. المنافسة المضافة والقدرة الإضافية ينتج عنها انخفاض الى معدل العائد المطلوب Product Differentiation, Service and Quality can separate products from competition تميز المنتجات والخدمات وجودتها يمكن ان يبعدها عن المنافسة Principle 5: The power of Competitive Markets المبدأ الخامس:قوة أسواق المنافسة Dr. Ahmed Abdulhaq

19. The markets are quick and the prices are right. الاسواق سريعة والاسعار مناسبة The values of all assets and securities at any instant in time fully reflect all available information. كل المعلومات الموجودة في أي لحظة وكل الأوقات تعكس قيم كل الأصول والوراق المالية Principle 6: Efficient Capital Markets المبدأ السادس: فعالية أسواق راس المال Dr. Ahmed Abdulhaq

20. Managers won ’ t work for the owners unless it is in their best interest لن يعمل المدراء لدى الملاك مالم يكن ذلك في مصلحتهم A agency problem resulting from conflicts of interest between the manager/agent and the stockholder/owners. مشكلة الوكالة نتيجة صراع المصالح بين المدراء(الوكلاء) وحملة الأسهم (الملاك) Managers may make decisions that are not in line with the goal of maximization of shareholder wealth. المدراء يتخذون القرارات التي لم تكون في اتجاه تعظيم ثروة حملة الاسهم Principle 7: The Agency Problem المبدأ السابع: مشكلة الوكالة Dr. Ahmed Abdulhaq

21. The cash flows we consider are the after-tax incremental cash flows to the firm as a whole التدفقات النقدية التي يجب ان نأخذها في الاعتبار هي التدفقات النقدية الاضافية بعد خصم الضرائب للشركة بشكل عام Principle 8: Taxes and Business Decisions المبدأ الثامن: ضرائب واثرها على القرارات التجارية Dr. Ahmed Abdulhaq

22. Some risk can be diversified away, and some cannot بعض المخاطر متنوعة الى حد بعيد والبعض الاخر لايمكن The process of diversification can reduce risk, and as a result, measuring a project ’ s or an asset ’ s risk is very difficult. علمية التنويع هذه ممكن تقلل من المخاطر ونتيجة لذلك فقياس مخاطر المشروع او الأصول صعبة جدا Principle 9: All Risk is Not Equal المبدأ التاسع : كل المخاطر ليست متساوية Dr. Ahmed Abdulhaq

23. Each person has his or her own set of values, which forms the basis for personal judgments about what is the right thing Principle 10: Ethical Behavior is Doing the Right Thing, and Ethical Dilemmas Are Everywhere in Finance Dr. Ahmed Abdulhaq

24. Investment Decisions ( Capital Budgeting ) ( Investment decisions  revolve around how to best allocate money to maximize their value.) Financing Decisions ( Capital Structure ) ( Financing decisions  revolve around how to pay for investments and expenses) Asset Management Decisions ( Working Capital Management Decisions ) Decisions of Financial Manager

25. Investment Decisions how, when, where and how much money will be spent on investment opportunities. A firm has many options to invest their funds but firm has to select the most appropriate assets for investment which will bring maximum benefit for the firm. What specific assets should be acquired? What assets (if any) should be reduced or eliminated? Dr. Ahmed Abdulhaq

26. Investment Decisions What specific assets should be acquired? What assets (if any) should be reduced or eliminated? Dr. Ahmed Abdulhaq

27. Financing Decisions A company can raise finance from various sources such as by issue of shares, debentures or by taking loan and advances. These sources of finance can be divided into two categories: owners fund (no risk involve) and borrowers fund (risk involve). Find the least expensive sources of fund. Determine how the assets will be financed. Dr. Ahmed Abdulhaq

28. Financing Decisions What is the best type of financing? M ix type financing. What is the best financing mix? Mixer debt and equity . What is the best dividend policy? Paying a consistent percentage of net earnings. How will the funds be physically acquired? Dr. Ahmed Abdulhaq

29. Asset Management Decisions How do we manage existing assets efficiently ? Financial Manager has varying degrees of operating responsibility over assets. Greater emphasis on current asset management than fixed asset management . Dr. Ahmed Abdulhaq

30. 1- 30 Interrelationship of the decisions made by a Financial Manager

31. What are the Goals of the Firm? (General Goals) Dr. Ahmed Abdulhaq Survival Avoid financial distress and bankruptcy Beat the competition Maximize sales or market share Minimize costs Maximize profits Maintain steady earnings growth.

32. Shortcomings of these General Goals These goals are either associated with increasing profitability or reducing risk. Could increase current profits while harming firm (e.g., defer maintenance, issue common stock to buy Treasury-bills, etc.). Does not specify timing or duration of expected returns. Calls for a zero payout dividend policy. They are not consistent with the long-term interests of shareholders. Problems Dr. Ahmed Abdulhaq So it is necessary to find a goal that can encompass both profitability and risk.

33. The Real Goal of the Firm Maximization of Shareholder Wealth! Shareholders’ wealth can be measured as the current value per share of existing shares . Dr. Ahmed Abdulhaq

34. Strengths of Shareholder Wealth Maximization Takes account of: current and future profits and EPS ; the timing, duration, and risk of profits ; dividend policy ; and all other relevant factors. Thus, share price serves as a barometer for business performance. Dr. Ahmed Abdulhaq

35. The Modern Organization There exists a SEPARATION between owners and managers. Modern Organization Shareholders Management Dr. Ahmed Abdulhaq

36. Role of Management An agent is an individual authorized by another person, called the principal, to act in the latter’s behalf. Management acts as an agent for the owners (shareholders) of the firm. Dr. Ahmed Abdulhaq

37. Agency Theory Agency Theory is a branch of economics relating to the behavior of principals and their agents. Jensen and Meckling developed a theory of the firm based on agency theory . Dr. Ahmed Abdulhaq

38. Agency Theory Incentives include stock options , perquisites , and bonuses . Principals must provide incentives so that management acts in the principals’ best interests and then monitor results. Dr. Ahmed Abdulhaq

39. Social Responsibility Wealth maximization does not stop the firm from being socially responsible . Assume we view the firm as producing both private and social goods. Then shareholder wealth maximization remains the appropriate goal in governing the firm. Dr.Ahmed Abdulhaq

40. Organization of the Financial Management Function Board of Directors President (Chief Executive Officer) Vice President Operations Vice President Marketing Vice President Finance Dr. Ahmed Abdulhaq

41. Treasurer Capital Budgeting Cash Management Credit Management Dividend Disbursement Fin Analysis/Planning Pension Management Insurance/Risk Mngmt Tax Analysis/Planning Organization of the Financial Management Function Vice President of Finance Controller Cost Accounting Cost Management Data Processing General Ledger Government Reporting Internal Control Preparing Fin Stmts Preparing Budgets Preparing Forecasts Dr. Ahmed Abdulhaq