12/17/2021 BBA204 Financial Management

Introduction to

Management
Financial

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 Course Outcome

• Students are able to understand basics of Financial

Mgt
• KL-1, PO-1&2

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 Contents
1. Meaning
2. Scope
3. Nature
4. Objectives
5. Job of Financial Manager
6. Organization of Finance Function

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 Finance- Introduction

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“Art and science of managing money”

BBA204
Financial Management
Major Areas:
1. Financial Services
2. Financial Management

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 Financial Management

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According to Dr. S. N. Maheshwari,

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"Financial management is concerned with

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raising financial resources and their
effective utilization towards achieving the
organizational goals."

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 Traditional Approach
 Role of Financial Management was restricted

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to only procurement of funds

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 The work of financial manager was limited
to:

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1. Arrangement of funds from Financial
Institutions
2. Arrangement of funds from other sources
namely shares, debentures etc
3. Taking care of the legal and accounting 6

relationship
 Accounting Equation:

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Assets = Liabilities + Capital

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Non Current Assets + Working Capital = Debt + Equity

Application of Funds Sources of Funds

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 Scope of financial management:
Key Scope of Financial Management are
divided in four categories

Investment Financing

Dividend
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 Investment Decisions

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Working Financial

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Capital Assets
Capital Assets Assets

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2 Conflicting
1. Return Issues
2. Risk
3. Short tem ST LT
Profits Sufficient to Minimize to
4. Liquidity avoid improve 3 Return
insolvency profitability 1 Risk
2 Liquidity 9
 Financing Decision
1. How much is needed?

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Requirement Funding

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Existing CA & WC Existing Funding
+/- Investments/ Disposals +Retained Earnings
+- Change in WC +/- New Loans / Repaid
+/- Shares issued / Redeemed
Requirement for the Year
Funding for the Year

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 Funding

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2. Internally Generated or
Externally Sourced Funds.

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3. Gearing : Debt or
Equity

4. Short term or Long

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term Debt
 Dividends- How Much

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Considerations

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Financial Management
Profitability Liquidity Growth

Investor Legal
Expectations Restrictions

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 Nature of Financial Management:
o Financial management is a specialized branch of general management,

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in the present-day-times. Long back, in traditional times, the finance
function was coupled, either with production or with marketing;
without being assigned a separate status.

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o Financial management is growing as a profession. Young educated
persons, aspiring for a career in management, undergo specialized

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courses in Financial Management, offered by universities,
management institutes etc.; and take up the profession of financial
management.
o Despite a separate status financial management, is intermingled with
other aspects of management. To some extent, financial management
is the responsibility of every functional manager. For example, the
production manager proposing the installation of a new plant to be
operated with modern technology; is also involved in a financial
decision. 13
 Financial management is multi-disciplinary in approach.

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It depends on other disciplines, like Economics,
Accounting etc., for a better procurement and utilisation

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of finances.
 The finance manager is often called the Controller; and

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the financial management function is given name of
controllership function; in as much as the basic guideline
for the formulation and implementation of plans-
throughout the enterprise-come from this quarter.
 Financial management is not simply a basic business
function along with production and marketing; it is more
significantly, the backbone of commerce and industry. It
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turns the sand of dreams into the gold of reality.
Objectives of
Financial
Management

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Wealth
Maximisation

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Customer Profit
Satisfaction Maximisation

Sales 15

Maximisation
 FM AND OTHER AREAS OF
MANAGEMENT

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 Financial Management and Production Department: The
production department of any firm is concerned with the
production cycle, skilled and unskilled labour, storage of

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finished goods, capacity utilisation, etc. and the cost of
production assumes a substantial portion of the total cost. The
production department has to take various decisions like

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replacing machinery, installation of safety devices, etc. and all
the decisions have financial implications.

 Financial Management and Material Department: Material

department covers the areas such as storage, maintenance and
supply of materials and stores, procurement etc. The finance
manager and material manager in a firm may come together
while determining Economic Order Quantity, safety level,
storing place requirement, stores personnel requirement, etc.
The costs of all these aspects are to be evaluated so the finance 16

manager may come forward to help the material manager.

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 Financial Management and Personnel Department:
The personnel department is entrusted with the responsibility of
recruitment, training and placement of the staff. This department is

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also concerned with the welfare of the employees and their families.
This department works with finance manager to evaluate

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employees’ welfare, revision of their pay scale, incentive schemes,
etc.

 Financial Management and Marketing Department:

The marketing department is concerned with the selling of goods
and services to the customers. It is entrusted with framing
marketing, selling, advertising and other related policies to achieve
the sales target. It is also required to frame policies to maintain and
increase the market share, to create a brand name etc. For all this
finance is required, so the finance manager has to play an active role 17
for interacting with the marketing department.
 Job of Financial Manager

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Allocation of
Raising of funds Profit planning

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funds

Financial
Investor FOREX
management
Communication management
decisions
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 12/17/2021 BBA204 Financial Management
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Organization of Finance
Function
 Reference
 Khan, M. Y., & Jain, P. K. Financial Management (7th ed.).

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Mc Graw Hill Education (India) Private limited.

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