Financial Mnagement :
Financial management means acquisition,financing and management of assets with some overall goal in mind.
CLASSIFICATION OF FINANCE FUNCTION:
1 Managerial Finance Functions:
1.1 Investment decisions by finance manager involving the type and volume of assets to be acquired.
1.2 Financial decision involving the decision about the various sources and extent of funds to be obtained.
1.3 Dividend decision by financial manager involving the extent of profit to be allocated and the extent of profit to be retained.
2 Routine Financial function:
2.1Finance Manager supervise cash receipts and payments and the safeguarding of cash balances.
2.2 Finance manager keeps custody and safeguarding of securities, policies and othervaluable documents.
2.3 Finance Manager keeps records of financial transactions and reporting.
GOALS OF CORPORATION/ COMPANY:
1. Main and one of the most inportant goal of any company is to maximise wealth of its shareholders by taking appropriate decision making by management.
2. If there is a Agency problem ( conflict between owner and management)arises in any company,then there should be abolish following ways:
2.1 By Compensation Plan:There should be an appropriate compensation package for the management show that the conflict with owner is minimize.
2.2 Board of Directors: There should be the formation of board of directors in the company,so that the proper dicesion making is done by them.
2.3 Takeover: If agency problem arises then owner should takeover the remaining stake of the investor who create such problems.
2.3 Specialised monitoring: There should be the specialised monitering system developed by apointing specialised govenment agency so that the agency problem did not arises.
2.4 Auditors:Company should appoint auditors in order to do correct auditing of its accounts.
IMPORTANT OF ANNUAL REPORTS OF COMPANY:
1.A company annual report is the most vital document consisting of comprehensive information about a company.
2.Anybody can access it depending there requirement.
3.It is use by the shareholder by thaking there further investment decision after analyzing it.
FINANCIAL FORCATING: It means a formal process of predicting future events,which can affect the enterprise operation.
TOOLS OF FINANCIAL FORCATING:
1.The day's sales method
2.Percentage of sales method
3.Simple regression method.
4.Multiple regression method
5.Proforma income statement.
6.Proforma balance sheet.
7.Proforma fund flow statement
8.Cash budget
STEPS INVOLVED IN FINANCIAL PLANNING:
Steps1: Project next year's operating cash flow
Steps2: Project what additional investment done in company and how much net income paid out as a dividend.
Steps3:Calculate the different between the projected cash flow and proposed uses.This is the cash which is raised from the sales of new asstes.
Steps4:Finally,construct the performa Balance Sheet that incorporates the additional assets and the increase in debt and equity.
Financial management means acquisition,financing and management of assets with some overall goal in mind.
CLASSIFICATION OF FINANCE FUNCTION:
1 Managerial Finance Functions:
1.1 Investment decisions by finance manager involving the type and volume of assets to be acquired.
1.2 Financial decision involving the decision about the various sources and extent of funds to be obtained.
1.3 Dividend decision by financial manager involving the extent of profit to be allocated and the extent of profit to be retained.
2 Routine Financial function:
2.1Finance Manager supervise cash receipts and payments and the safeguarding of cash balances.
2.2 Finance manager keeps custody and safeguarding of securities, policies and othervaluable documents.
2.3 Finance Manager keeps records of financial transactions and reporting.
GOALS OF CORPORATION/ COMPANY:
1. Main and one of the most inportant goal of any company is to maximise wealth of its shareholders by taking appropriate decision making by management.
2. If there is a Agency problem ( conflict between owner and management)arises in any company,then there should be abolish following ways:
2.1 By Compensation Plan:There should be an appropriate compensation package for the management show that the conflict with owner is minimize.
2.2 Board of Directors: There should be the formation of board of directors in the company,so that the proper dicesion making is done by them.
2.3 Takeover: If agency problem arises then owner should takeover the remaining stake of the investor who create such problems.
2.3 Specialised monitoring: There should be the specialised monitering system developed by apointing specialised govenment agency so that the agency problem did not arises.
2.4 Auditors:Company should appoint auditors in order to do correct auditing of its accounts.
IMPORTANT OF ANNUAL REPORTS OF COMPANY:
1.A company annual report is the most vital document consisting of comprehensive information about a company.
2.Anybody can access it depending there requirement.
3.It is use by the shareholder by thaking there further investment decision after analyzing it.
FINANCIAL FORCATING: It means a formal process of predicting future events,which can affect the enterprise operation.
TOOLS OF FINANCIAL FORCATING:
1.The day's sales method
2.Percentage of sales method
3.Simple regression method.
4.Multiple regression method
5.Proforma income statement.
6.Proforma balance sheet.
7.Proforma fund flow statement
8.Cash budget
STEPS INVOLVED IN FINANCIAL PLANNING:
Steps1: Project next year's operating cash flow
Steps2: Project what additional investment done in company and how much net income paid out as a dividend.
Steps3:Calculate the different between the projected cash flow and proposed uses.This is the cash which is raised from the sales of new asstes.
Steps4:Finally,construct the performa Balance Sheet that incorporates the additional assets and the increase in debt and equity.
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