HS16101-Principles of

Management
3.6.Financial Management –
Operational Objectives,
Goals, Functional Areas
Faculty
Dr. MARXIA OLI. SIGO
Department of HSS
NIT SIKKIM
 Board of Directors

Managing Director /
Chairman

VP/ Director (Finance)/ Chief Finance officer (CFO)

Treasurer Controller

Cash Manager Cost Accounting

Manager
Credit Manager
Tax Manager
Foreign Exchange Manager Financial accounting
mgr
Financial planning & Data processing mgr
fund raising manager
Internal Auditor
Capital Budgeting manager

Portfolio manager
Functions of a Treasurer

• Treasurer is mainly responsible for financing

& Investment activities.
• The main functions of a treasurer are
- Obtaining finance
- Investor relationship
- short term financing
- cash & credit mgt
- Investments & insurance
Functions of a Controller
• Controller is concerned with Accounting &
Control.
• The main functions of a Controller are
- Financial Accounting
- Internal audit
- Taxation
- Management accounting & control
- Budgeting & planning
Objectives of financial Management
a. Financial objectives
b. Non-Financial Objectives
Financial objectives or Financial Goals

 Profit maximization (profit after tax)

 Maximizing EPS(earnings Per Share)
 Wealth Maximization.
Profit Maximization

 Maximizing the Rupee Income of Firm

 Resources are efficiently utilized
 Appropriate measure of firm performance
 Serves interest of society also
Objections to Profit Maximization

• It is Vague
• It Ignores the Timing of Returns
• It Ignores Quality of benefits
Shareholders’ Wealth Maximization

• Maximizes the net present value.

• Fundamental objective — maximize the
market value of the firm’s shares
Maximizing EPS

• Ignores timing and risk of the expected

benefit.
• Maximizing EPS will not result in highest
price for company's shares.
Non financial Objectives

 General welfare of employees

 General welfare of society
 Fulfillment of responsibilities towards
customers, suppliers etc.
 Leadership in R&D.
 Effective utilization of funds
Interface of Financial Mgt with other
functional areas of Mgt
• Finance and Production
• Finance and Marketing
• Finance and Personnel ( Human resource)
• Finance and Research & Development
Finance and Production

• Finance is the basis of production and is

needed at every stage of production
• Planning & preparation of project report
• Acquiring raw materails, plant & machinery,
tools & spares, technological know how etc.
• Hold stocks of RM, WIP and FG .
Finance and Marketing

• Finance is needed in all vital areas of

marketing such as
• Sales promotion & Advertising
• Introduction of new products, diversification
of existing lines to satisfy customers changing
needs.
• Physical distribution of goods.
Finance and Personnel ( Human
resource)
• Finance in personnel is required for
• Recruitment
• Selection
• Training
• Promotion Schemes.
FINANCE AND RESEARCH &
DEVELOPMENT

• Finance in R& D is used for

• Innovation
• Technological up gradation
• To meet and cater the demands of changing
needs & preferences of customers
• To stay competitive
Functional Areas of Finance

• Personal Finance

• Corporate Finance

• Public Finance
Functional Areas of Finance

• Personal Finance

▫ Financial Position
▫ Adequate Protection
▫ Tax Planning
▫ Investment and Accumulation Goals
▫ Retirement Planning
▫ Estate Planning
Functional Areas of Finance

• Corporate Finance

▫ Balancing Risk and Profitability

▫ Maximizing Entity’s Wealth and Stock Value
▫ Managing the Working Capital
▫ Measure the Performance of Portfolio
Functional Areas of Finance

• Public Finance

▫ Related to Sovereign States & its entities

▫ Identification of required expenditure
▫ Source of that entities revenue
▫ Debt Issuance for Public Works Projects