Jatiya kabi Kazi Nazrul Islam University

Trishal, Mymensingh

Assignment on
“Financial Management & Its Area of Activities”
Course Name: Financial Management
Course Code: HRM-305

Submitted to Submitted by

Sharifa Akter Ajit Chandra Das

Lecturer Roll: 18133008
Department of Human Resource Department of Human Resource
Management Management
Jatiya Kabi Kazi Nazrul Islam University Jatiya Kabi Kazi Nazrul Islam University

Date of submission: 14.10.2021

 Acknowledgment

It is a real pleasure to express our deepest appreciation sincere gratitude and heartiest
gratefulness to our course instructor “Sharifa Akter” Mam.
This assignment is an essential part of BBA program as one can gather practical knowledge
within the short period of time by observing and doing the works of chosen topic.
At first, we like to pay our thanks to almighty Allah for helping us to do all the works with
perfection. However, to complete task through different articles and magazine to learn
thoroughly regarding Financial Management. We can understand pros and cons of Financial
Management area and its structure.

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 Table of content

S. N Content Page
1. Executive Summary 4

2. Introduction 5

3. What is Financial Management 5-6

4. Objective of Financial Management 6

5. Importance of Financial Management 6

4 Role of Finance in a typical Business Organization 7

5. Structure of Financial Management 7

6. Activities of Financial management in Business Organization 8

7. Methodology 9

8. Objective 9

9. Limitation 10

10. Company Profile 10

11. Financial Analysis 11-12

12. Recommendation 12

10. Conclusion 13

11. Reference 13

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 Executive Summary

Financial management comprises the forecasting, planning, organizing, directing, co

ordinating and controlling of all activities relating to acquisition and application of the
financial resources of an undertaking in keeping with its financial objective.
Two Basic Aspects of Financial Management-
• Procurement of Funds
• Effective Utilization of Funds

• Traditional Phase: Only day during occasional events

• Transitional Phase: The day-to-day problems that financial managers faced
• Modern Phase: Still going on

• Profit Maximization means that the primary objective of a company is to earn profit
• Wealth or Value Maximization means that the primary goal of a firm should be to
maximize its market value
Keywords: Financial Management, Area of activities, Company profile, financial analysis

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 1.Introduction:
In this Assignment, first try to give an idea about-
• Financial Management
• Its structure &
• Its area of activities

Financial Management means planning, organizing, directing and controlling the financial
activities such as procurement and utilization of funds of the enterprise. It means applying
general management principles to financial resources of the enterprise.

1.1 What is Financial Management:

Financial management is concerned with acquisition, financing and management of assets with
some overall goal in mind. Thus, the decision function of financial management can be broken
down into three major areas: the investment, financing and assets management decisions.

Financial Management

Investment Decision Financing Decision Assets Management

Decision

Figure: Major Areas of Financial Management

1.Investment Decision

Investment decision begins with a determination of the total amount of assets needed to be
held by the firm-size of the firm –composition of the assets

2.Financing Decision

Capital structure of the firm- mix of funds i.e. debt financing or equity financing How to
acquire the needed funds e.g. short term loan, long term lease agreements, negotiating a sale of
bond or stock etc.

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3.Assets Management Decision

The financial manager is charged with varying degrees of operating responsibility over
existing assets Management of current assets. The optimal level of a current assets depends on
the profitability and flexibility associated with that level in relation to the cost involved in
maintaining it Decisions regarding the management of assets must be made in accordance with
the underlying objective of the firm: maximize profits

1.2 Objective of Financial Management:

The financial management is generally concerned with procurement, allocation and control of
financial resources of a concern. The objectives can be

• To ensure regular and adequate supply of funds to the concern

• To ensure adequate returns to the shareholders which will depend upon the earning
capacity
• To ensure optimum funds utilization
• It looks at both time and risk of business
• Wealth maximization is a more holistic objective of business
• To ensure safety on investment, i.e, funds should be invested in safe ventures so that
adequate rate of return can be achieved
• To plan a sound capital structure-There should be sound and fair composition of
capital so that a balance is maintained between debt and equity capital

2. Importance of Financial Management:

Importance of Financial Management

• Financial Planning

• Acquisition of Funds

• Acquisition of Funds

• Proper Use of Funds

• Financial Decision

• Improve Profitability

• Improve Profitability

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3. Role of Finance in a typical Business Organization:

• Determination of fixed assets

• Determination of current assets
• Determination of proportion of long-term and short-term finance
• Determination of proportion of various sources of long-term finance
• Determination of various items of profit and loss account

4. Structure of Financial Management:

Board of Director

President

V.P Sales V.P Finance V.P Operation

Treasurer Controller

Credit Manager Cost Accounting

Inventory Manager Financial Accounting

Capital Budgeting Tax Department

Figure: structure of financial management

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5. Activities of Financial management in Business Organization:
The role of a corporation’s management is to increase the value of the firm to its shareholders
while observing applicable laws and responsibilities. Corporate finance deals with the
strategic financial issues associated with achieving this goal, such as how the corporation
should raise and manage its capital. Such as-

Growth of funds

Allocation of funds

Creation of funds

1. Preparation of Balance Sheet Approach to Valuation

• First, the assets are recorded at historical costs, which may be much greater than or
much less their present market values.
• Second, assets such as patents, trademarks, loyal customers, and talented managers do
not appear on the balance sheet but may have a significant impact on the firm’s ability
to generate future profits

2. Measurement of Cash vs. Profits

Since cash today is worth more than the same amount of cash tomorrow, a valuation
model based on cash flow can discount the value of cash received in future years, thus
providing a more accurate picture of the true impact of financial decisions.

3. Measurement of Cash Cycle

The duration of the cash cycle is the time between the date the inventory is paid for and
the date the cash is collected from the sale of the inventory.

Days in inventory + Days in receivables – Days in payables

4. Calculating Revenue, Expenses, and Inventory

A firm’s income is calculated by subtracting its expenses from its revenue. However, not
all costs are considered expenses; accounting standards and tax laws prohibit the
expensing of costs incurred in the production of inventory.

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5. Assessment of Financial Ratios

A firm’s performance can be evaluated using various financial ratios. Ratios are used to
measure leverage, margins, turnover rates, return on assets, return on equity, and liquidity.

6. Decision making Bank Loans

Bank loans can be classified according to their durations.

• There are short-term loans (one year or less),
• long-term loans (also known as term loans), and
• revolving loans that allow one to borrow up to a specified credit level at any time
over the duration of the loan.

7. Find the Sources and Uses of Cash

There are two sources of cash-

• reducing assets or
• increasing liabilities or equity.

8. Ensure Sustainable Growth

A company’s sustainable growth rate is calculated by multiplying the ROE by the

earnings retention rate.

9. Organizational Risk Management

• Business risk
• Financial risk
• Total corporate risk

6.Methodology:

For this assignment I show to Dhaka stock exchange to buy the financial report. And also,
discuss the Renata Ltd Head office to collect necessary information.

7. Objectives:

First of all, it should be mention that making an assignment is always challenging. For
completing assignment on “The practices of Financial Management in Business
Organization” needs time and hard work. Here is the summary of our objectives-

• It helps me to get the basic knowledge about Financing in organization.

• As a student of Business Studies, I get lots of information about organizational
practices.
• Practical knowledge in financial management.
• It helps me to find the how total financial activities are going on in the organization.

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8. Limitation of the Work:

While I working on this assignment, I had faced some problem. Problems are-

• Problem in getting information about total Financial Management structure.

• Lack of primary data made this work little bit dry.
• Not enough journal & magazines.
• Lack of primary data
• Sometimes non-cooperative people.
• Lack of time is another big problem while I working on this assignment.

9.Company Profile:

Discuss about “Renata Limited.” Renata Limited is one of leading pharmaceutical company
in Bangladesh. Founded in 1972 as a subsidiary of Pfizer Inc.

1 Types of company- Listed Public Limited

2 Turnover- US $21.0 Million
3 Retained Earnings- US $5.0 Million
4 Net Asset Value- US $11.0 Million

5 Main Business- Manufacture and Marketing of Human Pharmaceuticals

Human Pharmaceuticals to Myanmar, Nepal and Sri

6 Export -
7 Licensing Arrangement-
8 Contract Manufacturing-
9 Investment-
Lanka
Providing technical assistance to Deurali Janata
Pharmaceuticals Private Limited (Nepal)
Contract manufacturing Oral Dehydration Salt
formulation
100% Shareholding in Renata Argo Industries Limited

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10. Financial Analysis:
In my personal finding, collect the annual report of 2005 & searching website of Renata Ltd,
the financial department of Renata Ltd doing all over the activities of –
• Preparation of Balance Sheet Approach to Valuation
• Measurement of Cash vs. Profits
• Measurement of Cash Cycle
• Calculating Revenue
• Expenses, and Inventory
• Assessment of Financial Ratios
• Decision making Bank Loans
• Find the Sources and Uses of Cash, Ensure Sustainable Growth
• Measurement of Firm Value
• Equity Value
• Debt Value
• Assessment of organizational Capital Structure
• Organizational Risk Management
• Decision Making in Cash Flows to Debt and Equity etc.
In following I discuss some financial Statement of year 2005 of Renata Ltd. Financial
results of the Company for the year 2005 & compare with 2004 &2003

Content 2005 2004 2003

Profit before tax 279,387,690 208,308,833 150,434,885

(-) Provision for tax 86,819,430 62,820,892 44,873,677

Net Profit after tax 192,568,260 145,487,941 105,561,208

(+) Un-appropriated profit brought 313,458,030 216,734,815 152,689,300

forward

Profit available for appropriation 506,026,290 362,222,756 258,250,508

APPROPRATION 2,197,657 6,924,906 6,649,168

RECOMMENDED:Tax holiday reserve

Cash dividend @ Taka 50/- per Share 33,471,850 27,893,200 23,244,350

Stock dividend (Bonus Share) 13,388,740 11,157,280 9,297,740

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 Dividend distribution tax @ 2,769,320 2,324,435
10% of cash dividend

Beside This Renata Ltd Management Practices following financial measurement & activities

• Property, plant and equipment.

• Capital work in-progress
• Investment at cost
• Stocks and stores
• Debtors
• Trade debtors
• Advances, deposits and prepayments
• Cash and bank balances
• Workers’ profit participation fund
• Short term bank loans
• Provision for taxation
• Turnover
• Cost of goods sold
• Cost of goods manufactured
• Cost of raw materials consumed
• Purchases, issues and stocks of raw materials
• Summarized quantity of purchases, issues and stocks of raw materials
• Administrative, selling and distribution expenses & other expenses
• Basic earnings per share (EPS)
• Cash and cash equivalents
• Payments to directors and officers
• Capacity utilization – single shift basis
• Outstanding letters of credit
• Cash flows from operating activities
• Cash flows from investing activities
• Cash flows from financing activities

11.Recommendation:

While I researching in this assignment, there are some lacking. I feel that Reneta Ltd can
improve them a lot. So, I have some suggestion & this are-

• Improving the infrastructure financial management.

• Need more publications & proper explanation.
• Improving the facility & trained professional.
• Improving productivity, the training facility should be increasing.
• For costs minimize financial management suggest product bench marking & product
value chain system.
• Need to be developing according to the global needs.
• Raw materials of the Reneta products are comparatively very high. So it needs new
supplier.
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 • Financial department need to give attention in EPS.
• Decision making should be properly for new launch (Product & Technology).
• Accounting system should be full computerized.

12.Conclusion:

After going through all the financial analysis of the company I think the company is in a good
position. Although some analyses are falling gradually yet if the company pays a little
attention to the related matters which can improve, they will do much better in later.

Finally, I would like to say that financial management is one of the core departments in the
business organization point of view. A good business organization needs strong financial
management department for achieving their mission & objective.

13. Reference:

https://en.wikipedia.org/wiki/Financial_management

https://scholar.google.com/scholar?q=Financial+Management+Journal&hl=en&as_sdt=
0&as_vis=1&oi=scholart

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