WEALTH MAXIMISATION. FUNCTIONS OF FINANCIAL MANAGER DECISIONS IN FINANCIAL MANAGEMENT

THIS PRESENTATION COVERS THE PRINCIPLES,
DEFINITION, BUSINESS FINANCE, THE FINANCE FUNCTION,
OBJECTIVES OF FINANCIAL MANAGEMENT AND PROFIT AND WEALTH MAXIMISATION.
FUNCTIONS OF FINANCIAL MANAGER
DECISIONS IN FINANCIAL MANAGEMENT
FACTORS AFFECTING FINANCIAL PLAN
STEPS IN FINANCIAL PLANNING

1. UNIT 1: INTRODUCTION TO FINANCIAL MANAGEMENT Financial Management in Business THIS PRESENTATION COVERS THE PRINCIPLES, DEFINITION, BUSINESS FINANCE, THE FINANCE FUNCTION, OBJECTIVES OF FINANCIAL MANAGEMENT AND PROFIT AND WEALTH MAXIMISATION. FUNCTIONS OF FINANCIAL MANAGER DECISIONS IN FINANCIAL MANAGEMENT FACTORS AFFECTING FINANCIAL PLAN STEPS IN FINANCIAL PLANNING

2. Introduction Financial Management plays a crucial role in every business. It's about efficiently handling funds and making strategic decisions. Today, we will delve into the core concepts of financial management.

3. Financial Management Definition Financial management refers to the strategic handling of a corporation's funds. It encompasses acquiring funds and effectively utilizing them to achieve organizational goals.

4. Business Finance Business finance involves planning, obtaining, controlling, and administering funds used in business operations. Just like the gears in a machine, finance is the driving force behind a business.

5. Finance Function The Finance Function is an integral part of financial management. It involves controlling and planning financial resources, ensuring a company's financial health.

6. Objectives of Financial Management Financial management has several objectives: Profit Maximization Wealth Maximization Balanced Asset Structure Liquidity Judicious Planning of Funds Efficiency Financial Discipline

7. Advantages Profit Maximization Profit Maximization is about earning the highest possible profits for shareholders. Profit is a barometer through which the performance of a business unit can be measured. Profit ensures maximum welfare to the shareholder-employees and prompt payment to creditors of a company. It increases the confidence of management It attracts investors to invest their savings in securities. Profits indicate the efficient use of funds for different requirements.

8. Disadvantage of Profit Maximization It is not a clear term. It encourages corrupt practices to increases the profit. it doesn't consider the element of risk. It doesn't consider the impact of time value of money. Huge amount of profit attracts government intervention. It attracts cut-throat (a lot of) competitors. It is a narrow concept , later it affects the long-term liquidity of a company A huge profits invites problems from workers , they demand high salary and fringe benefits

9. Wealth Maximization Wealth Maximization aims to increase the company's net worth over the long run. Advantages: It considers the time value of money (net present value). Wealth is a straightforward concept. It considers the risk factor. Aims at increasing the market price of the share The main goal is to increase the wealth of the shareholder Disadvantages: Wealth maximisation is a prescriptive idea Leads to controversy Not socially desirable Ownership and management conflict

10. Functions of Financial Manager A financial manager's role includes: Estimation of Financial Requirements Selection of the Right Sources of Funds Allocation of Funds Analysis and Interpretation of Financial Performance Analysis of CostVolume -Profit Capital Budgeting Working Capital Management Profit Planning and Control Fair Returns to the Investors Maintaining Liquidity and Wealth Maximization

11. Decisions in Financial Management Three crucial decisions: Investment Decision Financing Decision Dividend Decision

12. Investment Decision The investment decision involves allocating funds to different projects. It determines where to invest and how much. Visualize investment options with graphs or charts.

13. Financing Decision The financing decision involves choosing the right sources of funds. It's about deciding the capital structure - equity, debt, or a mix. Visuals can help compare financing options. Ex: a) Equity b) Equity + Debenture C) Equity + Debentures +Preference shares d) Equity + Debentures +Preference shares +public deposit with the term loan

14. Dividend Decision The dividend decision is about allocating profits to shareholders and retained earnings. It influences shareholder returns and company stability. Ex: a) High percentage of dividend b) Maximum returns to shareholders in the form of capital gain c) How much cash dividend should be paid to the shareholders? d) Maintenance of stable dividend rate.

15. Current Asset Management Managing current assets ensures business liquidity. It includes cash, receivables, and inventory management. Visualize the components of working capital.

16. Financial Planning Financial planning is the blueprint for managing finances. It's crucial for aligning financial actions with business goals.

17. Factors Affecting Financial Plan Nature of the Industry Amount of Risk Status of Industrial Unit Alternative Sources of Finance Attitude of Management Magnitude of External Capital Requirements Capital Structure Need for Flexibility Government Control Cost of Finance

18. Steps in Financial Planning Financial planning involves these steps: Estimating Capital Requirements Setting Financial Objectives Formulating Financial Policies Laying Down Financial Procedures Financial Forecasting Reviewing the Financial Plan

19. Thank you for your time and attention 🙂