Functions of financial management

Simple Structural Business Financial Management Function

1. Simple Structural Business Financial Management Function Carlos Gultiano MBA 104

2. Financial Management “Financial management is the activity concerned with planning, raising, controlling and administering of funds used in the business.” –  Guthman and Dougal “Financial management is the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations.”-  Massie Financial Management is an organizational activity that is concerned with the management of financial resources. CFO/Financial Managers   are responsible for the financial health of an organization. 

3. Finance Decision Areas of Financial Management Decisions Investment Decision Management Investment Return/ Dividend Decision

4. Functions of Financial Management

5. Estimate Required Capital Forecast the amount of required capital Determine short term and long term requirement of the business Preparation of financial planning for present and future

6. Different sources of fund Involves the analysis of short term and long term debt equity Debt Equity - measure of the relative contribution of the creditors and shareholders or owners in the capital employed in business Determine Capital Structure Objective : Maximize shareholders wealth with a cost of capital

7. Choosing the best option which will provide greater earning possibility in less cost Possible choices for raising additional funds: Evaluate and Select Sources of Funds Loans from banks and other financial institutions Issue of company shares and debenture (bonds/vouchers) Public deposit

8. Amount of funds and allocation of funds Allocate and Control Funds Different investment Tools Portfolio Analysis Net Present Value Average Rate of Return Internal Rate of Return

9. Distribute profits/surplus or retain for future use Distribute Profits or Surplus Dividend - a sum of money paid regularly (typically annually) by a company to its shareholders out of its profits

10. Monitoring, controlling and overseeing of financial activities and business position Monitoring Financial Activities Ratio Analysis Controlling and monitoring financial activity can use several techniques such as: Forecasting of Financials Cost Analysis Control and Profit Distribution Techniques