Index

1. What is finance? 2 Objectives of Financial Management 3. Finance Functions 4. Factors affecting Financial objectives 5. Analysis of financial statements 6. Important Ratios 7. Elements of Cost

What is finance?
 

Science of managing money The methods used to raise, allocate, and use monetary resources over time, considering risk entailed with it In simple words: Where to get money from and how to use it efficiently

Objectives of financial Management

  

  

Maxmisation of profits Survival and Growth of Firm Efficient use of short medium and long term finances Value addition Growth in market value of share Minimisation of financial charges

Finance Functions


Forecasting
Demand and Sales volume / Revenue Cash Flows i:e Credit and collections Pricing i:e Cost + Profit Margins Inventory Management

Organisation
Financial Relations Accounting Systems

Planning
Investment Manpower Marketing Strategies Development Process

Finance Functions


Coordination
Linking Financial Functions with other areas Linking with Budget and Five year Plans

Control
Financial Charges Achievement of Desired objectives Overall monitoring of systems Equilibrium in capital

Factors affecting financial objectives

    

Inflation Rate GDP growth Rate Exchange Rate Interest Rates Tax Structure

Analysis of financial statements

Particulars 2006-07
Rs. In lacs

2007-08
Rs. In lacs

Increase / Decrease in %
22.60 7.14 32.85 97.23 81.20 18.05

Sales Production Cost Administration Cost Selling and Distribution Finance Cost Total Cost

1814.48 1090.37 519.68 33.92 23.94 1667.91

2224.52 1168.25 690.41 66.9 43.38 1968.94

Analysis of financial statements

Particulars 2006-07
Rs. In lacs

2007-08
Rs. In lacs

Increase / Decrease in %
23.35 5.88 18.54 66.44 140.20

Shareholders fund Loan Funds Fixed Assets Current Assets Current Liabilities

410.68 261.73 192.42 693.37 197.71

506.58 277.13 228.1 1154.07 474.9

Analysis of financial statements

Particulars 2006-07
Rs. In lacs

2007-08
Rs. In lacs

Increase / Decrease in %
55.26 61.65 173.01 96.76

Inventories Sundry Debtors Cash and Bank Balance Loans and Advances

175.29 435.02 24.08 57.41

272.15 703.22 65.74 112.96

Sundry creditors

117.24

306.21

161.18

Important Ratios
     

Debt Equity Ratio=Long Term Debt / Shareholders fund=0.55:1 Current Ratio Liquid Ratio

Current Asset/Current Liabilities =1.90:1 = 1.45:1 = 17.15%

= As above Less Inventories ROCE / ROI = Profit/Capital Employed Gross Profit Margin =GP/Sales = 47.48% Net Profit Margin = NP/Sales = 9.77%

Important Ratios
     

Debtors Turnover ratio =Sales/Debtors = 3 times Average Collection Period= Debtors/ sales = 117 days Creditors Turnover ratio =Creditors / Purchase = 91 days Inventory Turnover Ratio= Sales/Average Inventory = 4 EPS ratio =Profit after Tax+ Depreciation /No. of Shares =7.06 Productivity Ratio= Sales /No. of Employees= 12.63 lacs

Elements of Cost


Production Cost:
Direct Material Direct Labour Direct Expense Manufacturing Expense

Administration Cost:
Salary Electricity, Communication, Rates and Taxes Repairs and Maintenance Other Expenses

Elements of Cost


Selling and distribution Cost

Sales Commission Advertisement Sales Promotion and Conference

Finance Cost
Interest Bank charges

Notional Cost
Depreciation Carrying Cost

Thank

you