PROGRAM – MASTERS OF BUSINESS ADMINISTRATION (MBA) SEMESTER – 2

COURSE CODE and NAME: DMBA 202 – Financial Management

NAME : ROHIT RANJAN

ROLL NO. 2314512674
Financial Management

Financial Management way preparation, arranging, directing and ruling the fiscal endeavors to a degree
obtainment and exercise of funds of the activity. It way administering comprehensive administration
standard to financial resources of the energy.
Financial administration focuses on percentages, equities and debts. It is beneficial for flat case for
transporting papers administration, distribution of profit, capital lifting, dodging and protect vacillations
in unfamiliar currency and production phases.
Financial administration is the process of preparation cash reserves, systematizing available funds and
ruling monetary ventures to obtain the aim of an arranging. It includes three main conclusions that are
financing determinations, outlay decision and profit resolution for a particularized magnitude. Investment
conclusion includes venture capital conclusion and capital calculating resolution. Financing conclusion
includes identifying beginnings of expenditure, deciding the event and cost of funding and directing
investment return.
Scope

1. Investment conclusions contains loan implant property (named as capital budgeting). Investment in
current property are likewise any of expense resolutions named as working capital conclusions.
2. Financial determinations - They have connection with the lifting of finance from differing money
which will deliver resolution on type of beginning, ending of loan, cost of outlay and the returns thereby.
3. Dividend resolution - The finance director has to take resolution accompanying deference to computer
network profit distribution. Net profits are mainly detached into two:
a. Dividend for shareholders- Dividend and the rate of it has expected certain.
b. Retained profits- Amount of employed profits has to be concluded that will deliver growth and variety
plans of the resourcefulness.

Objectives of Financial Management

The financial administration is mainly regard obtainment, distribution and control of cash available for
use of a concern. The objectives maybe-

1. To guarantee common and enough supply of collaterals to the concern.

2. To guarantee adequate returns to the shareholders that will deliver the acquiring competency, quoted
price of the share, beliefs of the shareholders.
3. To ensure best resources exercise. Once the budget are acquired, they concede possibility be utilized in
maximum attainable habit not completely cost.
4. To guarantee security on loan, i.e, finances bear be devoted in reliable ventures for fear that adequate
rate of return maybe attained.
5. To plan a sound capital Structure-There endure be sound and fair arrangement of capital so that a
balance is uphold middle from two points debt and working capital.
Function of commercial administration

1. Estimation of capital necessities: A finance producer has to form estimation accompanying best wishes
to capital necessities of the party. This will deliver anticipated costs and profits and future programmers
and policies of a concern. Estimations should should in an enough class that increases acquiring capacity
of adventure.
2. Determination of capital arrangement: Once the guess has happened created, the capital form has to be
determined. This includes short- term and long- term bill impartiality study. This will deliver the
proportion of venture capital a guest is enjoying and supplementary cash reserves that have to be bred
from outside bodies.
3. Choice of beginnings of money: For supplementary funds expected obtained, a party has many
selections like-
a. Issue of shares and debentures
b. Loans expected captured from banks and financial organizations
c. Public deposits expected fatigued like inform of bonds.

Choice of determinant will believe relative merits and demerits of each source and ending of expenditure.

4. Investment of resources: The finance producer has to determine to assign funds into money-making
ventures for fear that skilled is security on money and normal returns is possible.
5. Disposal of surplus: The net profits conclusion has to ought for one finance director. This maybe
exhausted two ways:
a. Dividend proclamation - It contains labeling the rate of profits and different benefits like dividend.
b. Retained profits - The volume has expected determined that will deliver growth, creative,
diversification plans of the party.
6. Management of cash: Finance director has to create determinations accompanying regards to cash
administration. Cash is necessary for many purposes like fee of incomes and fees, fee of electricity and
water bills, fee to creditors, convergence current burdens, sustenance of enough stock, purchase of natural
resources, etc.

7. Financial controls: The finance organizer has not only to plan, procure and take advantage of the
capital but he still has to dominate over property. This maybe done through many methods like
percentage study, commercial predicting, cost and profit control, etc.

The significance of financial administration is essential to an institution. It is a road to accomplish aims

and objectives. The monetary administrator measures administrative adeptness through decent
distribution, acquisition, and administration. It raises functional effectiveness by providing a appropriate
supply of fund. The following conspicuous importance is erect from fiscal administration:
• Provides counseling in economic planning
• Assist in achieving finances from various beginnings
• Helps in establishing the appropriate amount of budget
• Increase organizational adeptness
• Reduces delay result
• Cut down monetary costs
• Reduces cost of fund
• Ensures correct use of fund
• Helps trade firm to take monetary decisions
• Makes a direction of scoring maximum profits arousing minimum cost
• Increase shareholder’s resources
• Control the economic facets of the business
• Provide news through economic newsgathering
• Makes the attendants informed about latest trends conditional funds.
Financial function
Investment Decision

One of ultimate main finance functions search out cleverly assign capital to general assets. This action is
as known or named at another time or place capital allocating. It is main to assign capital in those
unending assets so concerning take maximum yield from now on. Following are two together facets of
investment resolution

a. Evaluation of new expenditure in conditions of appropriateness

b. Comparison of interrupt rate against new expenditure and prevailing finance.

Since the future is changeable so skilled are troubles in computation of expected return. Along with
changeableness comes the risk determinant that has expected captured into concern. This risk factor plays
a very important part in manipulative the wonted return of the anticipated financing. Therefore, while
considering asset suggestion it is main to include two together wonted return and the risk involved.
Investment conclusion not only includes assigning capital to general property but more involves
conclusions of utilizing cash reserves that are acquired by transfer those assets that enhance less money-
making and less creative. It intelligent decisions to dissolve depreciated property that are not
accumulating advantage and take advantage of those funds in acquiring additional advantageous property.
An moment cost of capital needs expected calculating while discontinuing specific property. The correct
renounce rate is premeditated by utilizing this opportunity cost of the necessary rate of return (RRR)
Financial resolution
Financial resolution is still another main function that a financial stable must act. It is main to form
intelligent determinations about when, where and by what method concede possibility a trade achieve
means. Funds

1. The results of “over-funding” are far weightier than “under funding”. Discuss the assertion by
expanding on the causes and belongings of over-funding and Undercapitalization.
Ans 1.
Over-funding and under-funding are two fiscal states that can considerably impact a company's
movements and commercial well-being. Over-funding happens when a association has more capital
(impartiality and indebtedness) than it can capably use, chief to substandard returns on finance. On the
other hand, under-funding occurs when a guest does not have enough capital to keep efficiently,
conceivably chief to fiscal distress and an failure to meet responsibilities. While both positions have their
own set of challenges, over-funding contributes to have weightier results than under-funding.
Causes of over-funding can change but frequently contain assertive or erroneous monetary projections,
overdone appropriating,

2. Zubi wants to purchase bonds in likely alternative positions, by allegation beneath. You are necessary
to warn her in selecting high-quality alternative:
Bond Price =Rs.500
Coupon rate= 8%
Life of bond = 5 Years
Redemption worth = Rs.500
Rate of return = 10%
Options:
1. Interest accumulated Annually
2. Interest amassed Bi-Annually
3. Interest accumulated Quarterly
Ans 2.
To warn Zubi on selecting highest in rank alternative for lending in bonds, we need to reckon the listen to
adulthood (YTM) each alternative. The YTM is the total return expected on a bond if it is grasped as far
as it grows up.
3a. Differentiate middle from two points Operating and Financial Leverage.
b. If you provide Rs. 2,400 done yearly to a benefits paid after retirement. Calculate what will be the
future worth concerning this fee in 30 age if 7% is the annual rate of return.
Ans 3.
a. Operating influence and economic influence are two main ideas in fiscal administration that handle the
use of established costs and liability in a association's capital makeup.
Operating Leverage: Operating influence refers to the use of established money needed to run a business
by a guest. It is the scope at which point a guest uses established costs in allure movements. Companies
accompanying extreme operating influence

4. Do you judge that various determinants moving capital construction decisions will be believed
otherwise by various parties? Support your answer accompanying appropriate instances.
Ans 4.
Different determinants moving capital form decisions can actually be considered otherwise by various
associations. Capital makeup conclusions, that include deciding the mix of indebtedness and impartiality
loan a guest will use, believe differing determinants to a degree manufacturing standards, company
intensity, progress stage, appropriateness, and risk demand. Here's by means of what few determinants
maybe considered otherwise:
Industry Norms: Different

5. You are required to formulate a report appearance the venture capital necessary to finance the level of
venture of 18000 parts occurring from the following news: -
Particulars Rs.
Raw material apiece 12
Direct Labor per Unit 3
Overheads for one 9
Total Cost for one 24
Profit for one 6
Selling price for one 30

Levels
Broadly expressive, the process of monetary administration takes place at two levels. At the individual
level, financial administration includes adjusting expenses in accordance with the financial resources of
an individual. Individuals accompanying deferred payment arrangement or approach to capital spend their
services to make up for the impact of tariff and swelling. Else, they give it on unrestricted parts. They
needto be able to take the commercial conclusions that are destined to benefit bureaucracy in the end and
help them realize their fiscal aims.
From an administrative viewpoint, the process of commercial management is guide monetary preparation
and monetary power. Financial planningseeks to measure various cash available for use possible and plan
the content and organize of payments. Financial control refers to monitoring available funds. Inflow is the
amount of services coming into the party, while efflux is a record of the payment being made for one
party. Managing this drive of budget concerning the budget is essential for a business.
At the allied level, the main aim of the process of directing property search out reach the various aims a
association sets at a likely point momentary. Businesses again seek to produce solid amounts of profits,
following the set of financial processes.

Financial managers aim to boost the levels of possessions at their disposition. Besides, they control the
functioning on services put in by extrinsic financiers. Providing financiers accompanying enough amount
of returns on their investments is oneof the aims that each association tries to attain. Efficient fiscal
management ensures that this becomes attainable.
Strong economic administration in misrepresentation field demands managers to be ableto:

* Interpret commercial reports containing profit charges, Profits and Loss orP&L, available funds
statements and financial statement including gains and losses for a period assertion
* Improve the distribution of venture capital inside business movements
* Review and adjust economic calculating, and income and cost predicting
* Look at the funding alternatives for trade growth, containing two together longand short term payment

* Review the monetary well-being of the association or trade unit utilizing percentage reasonings, to a
degree the prepare ratio, profit per member and burden cost of capital
* Understand the miscellaneous methods utilizing in project and advantage valuations
* Apply critical commercial conclusion making methods to evaluate either to proceed with an finance
* Understand valuations foundations for trades, folders and obscured assets
Additional Information:
1. Raw material is achievable approximately for 2 months
2. Materials are active on an average for half a period
3. Finished merchandise are achievable on an average for two months
4. Credit allowed by creditors is two months in respect of natural resources provided.
5. Credit admitted to debtors is three months. Debtors are planned on the price originally requested.
6. Lag in fee of pays into pieces a period. Cash on hand and at the bank be necessary expected Rs.7000
7. You are cognizant that all ventures are fairly open all along the old age.

Ans 4.
To reckon the venture capital required to finance the level of project of 18,000 wholes done yearly, we
need to

6a. A production party places a occurring twice a year order of 24,000 parts at a price of Rs.20 for one.
Itscarrying cost is 15% and the order cost is Rs.12 per order. What is ultimate careful order quantity? And
by what method many orders need expected established?
b) Differentiate middle from two points hard and stupid capital conserving. 2.5+2.5+5
Ans 6a.
a. To find ultimate careful order capacity (EOQ) and the number of orders wanted, we can use the EOQ
formula:
𝐸𝑂𝑄=2𝐷𝑆/𝐻
Where: