Nature of financial management

Nature of financial management

1. WELCOME TO VIEWERS

2. A PRESENTATION On Behalf Of Team ‘‘CURSORS of BUSINESS’’

3. We are the members of team ‘ CURSORS of BUSINESS ’ 1. Jabed Hossain (L,52) 2. Anjan Kumar Das (54) 3. Md. Nazmul Haque (33) 4. Salma Islam (24) 5. Tamanna Nigar Tuli (29) 6. Md. Waqim Hossain (75) 7. Farjana Yasmin (78)

4. Presentation Title: Nature of Financial Management

5. Presentation Contents: What is Finance ? What is Financial Management ? Real & Financial Assets. What are the Functions of Finance ?

6. Contents (continue) : What are the Basic Area of Finance ? What is Agency Problem ? Why do they exist within a corporation ? What is Agency Cost ? How to Remove Agency Problem from a Corporation ?

7. Contents(continue): Who is a Financial Manager ? What are the Role of Financial Manager ? What are the Goal of Financial Management? Why Wealth Maximization is the main Goal of a firm ? Why Profit Maximization isn’t the main Goal of a firm?

8. FINANCE: Finance is the process of collection of fund from different sources at minimum cost, invest this fund different profitable sector, distribute this fund among effective users, and controlling this fund efficiently.

9. Finance is the art and science of managing wealth. The main objectives of finance is to make individuals & their businesses better-off.

10. FINANCIAL MANAGEMENT: Financial management is an effect of applied economics, because it is concerned with the allocation of a company’s scarce financial resources among competitive choices.

11. Real & Financial Assets: A firm requires real assets to carry on its business. Tangible real assets are physical assets that include plant, machinery, office, factory, furniture and building. Intangible real assets technical know- how, technical collaborations, patents and copyrights.

12. Financial assets, also called securities, are financial papers or instruments such as shares and bonds or debentures.

13. Function of Finance: The main function of finance are to raise capital to operate a business; to make the best use of resources; to manage the cash flow of the company; to perform good financial management etc.

14. 1. Investment Decision: A firm’s investment decisions involve capital expenditures. They are referred as capital budgeting decisions. A capital budgeting decision involves the capital or commitment of funds to long-run assets that would yield benefit in the future.

15. Two important aspects of Investment Decisions are : (a) the evaluation of the prospective profitability of new investment &; (b) the measurement of a cut-off rate against that the prospective return of new investments could be compared.

16. 2. Financing Decisions: Financing decision is the 2 nd important function to be performed by the financial manager. Financial manager must decide when, where from and how to acquire funds to meet the firm’s investment needs.

17. There are two central issues in Financing Decision following : 1. Capital Structure 2. Optimum Capital Structure

18. 3. Dividend Decisions: Financial manager must decide whether the firm should distribute all profits, or retain them, or distribute a portion and retain the balance.

19. The proportion of profits distributed as dividends is called the dividend-payout ratio. And the retained portion of profits is known as the retention ratio.

20. 4. Liquidity Decisions: Investment in current assets affects the firm’s profitability and liquidity. Current assets management that affects a firm’s liquidity is yet another important finance function.

21. Lack of liquidity in extreme situations can lead to the firm’s insolvency. At last, finance functions may affect the size, growth, profitability & the risk of the firm, and ultimately, the value of the firm.

22. BASIC AREA of FINANCE: There are four basic area of finance. They are following : Corporate Finance Investment Financial Institution International Finance

23. 1. Corporate Finance: The area of corporate finance within a business firm are budgeting, capital, managing working, financial analysis, financial statement development and more. It is the fundamental area of finance.

24. 2. Investment: The another area of finance is investment within a business particularly a large business. A business firm invest in assets ranging form short term securities to long term securities the stocks and bonds. The business invests for the same reason of individuals invest to earn and return.

25. 3. Financial Institution: Financial institution woks on hand to hand, with the financial markets regarding financial transactions. Financial institutions are actually financial intermediaries which help to transfer of funds between business and servers. It helps to ensure about all of transaction which are already include or predictably include in a firm to make info.

26. 4. International Finance: International finance concerned with studying global capital markets and might involve monitoring movements in foreign exchanging rate’s.

27. Agency Problem: The conflict of opinions & decisions between the shareholders and managing boards is referred to as agency problem. The agency problem is also known as the ‘‘ principal-agent problems ’’.

28. Causing of Existing Agency Problems in Large Corporations: Agency problems exist in large corporation. There are several reasons for agency problems. They are following : Conflicts of interests Conflicts of investment Conflicts of distributing profits Conflicts to manage the financial wealth

29. Agency Cost: The cost borne by stockholder to maintain a corporate governments structure that minimize agency problems and contribute to the maximization of owners wealth.

30. Way of Removing Agency Problems from a Corporation: There are several way to remove agency problems from a corporation, they are following : Giving the ownership rights to manager Monitoring by the shareholders

31. Reducing communication gap between owners and managers Increasing meeting a nd conference, Fulfill applied rules and regulation.

32. Financial manager is a person who is responsible in a significant way, to carry out the finance functions. Financial manager occupies a key position. His or her position in top management team. Financial Manager:

33. Financial Manager’s Role: The financial manager has not always been in the dynamic role of decision making. Financial managers roles are following: Funds raising. Funds allocation. Profit planning. Understanding capital market.

34. Funds Raising The traditional approach dominating the scope of financial management and limited the role of the financial manager simply to funds raising. It was during the major events such as promotion, reorganization, expansion, or diversification in the firm that the financial manager was called upon to raise funds.

35. Funds Allocation In modern enterprise, the basic function is to decide about the expenditure decisions and to determine the demand for capital for these expenditures. Financial manager is concerned with the efficient allocation of funds. The allocation of funds is considered important enough in achieving the firm’s long run objectives.

36. Profit Planning Profit planning refers to the operating decisions in the area of pricing, cost, volume of output and the firm selection of product lines, profit planning is therefore financing decisions. The mix of fixed and variable cost has a significant influence on a firm profitability. Fixed cost remain constant while variable costs change in direct proportion to volume change. It helps to anticipate the relationship between cost and profits.

37. Understanding Capital Market Capital market bring investors and firm together. Hence the financial manager has to deal with the capital markets. They would fully understand the operations of capital markets and the way in which the capital markets value securities. They would also know how is measured and how to cope with it in investment and financing decision.