4/27/2024 Lecture No. 6-Financial Management Financial Reporting Framework for Small- and Medium-Sized Industries ———— Key Concepts and Skills + Know the basic types of financial management decisions and the role of the financial manager + Know the financial implications of the different forms of business organization + Know the goal of financial management + Understand the conflicts of interest that can arise between owners and managersIntroduction to Financial Management + Finance: A Quick Look + Business Finance and The Financial Manager + Forms of Business Organization + The Goal of Financial Management + The Agency Problem and Control of the Corporation : + Financial Markets and the Corporation Basic Areas Of Finance + Corporate finance + Investments + Financial institutions + International finance 4/21/2073Financial Institutions + Companies that specialize in financial matters — Banks — commercial and investment, credit unions, savings and loans — Insurance companies + Job opportunities Why To Study Finance? + Marketing — Budgets, marketing research, marketing financial products Accounting ~ Dual accounting and finance function, preparation of financial statements Management ~ Strategic thinking, job performance, profitability Personal finance ~ Budgeting, retirement planning, college planning, day-to-day cash flow issues4/21/2023 Financial Management Decisions * Capital budgeting — What long-term investments or projects should the business take on? * Capital structure — How should we pay for our assets? — Should we use debt or equity? + Working capital management —How do we manage the day-to-day finances of the firm? Goal Of Financial Management What should be the goal of a corporation? — Maximize profit? — Minimize costs? — Maximize market share? — Maximize the current value of the company's stock? Does this mean we should do anything and everything to maximize owner wealth?| Equipment replacement | Git) Time Value of Money Adollar today is worth | more than a dollar a year from now. Therefore, projects that promise earlier returns are preferable to those | that promise later returns. 4/21/20234/27/2023 The Net Present Value Method ~ \To determine net present value we . . . + Calculate the present value of cash inflows, | | + Calculate the present value of cash | | outflows, | + Subtract the present value of the | outflows from the present value of | * | the inflows. j Pia 00 | Learning Objective Evaluate the acceptability of an investment project using the internal rate of return method.v3] Internal Rate of Return Method | Future cash flows are the same every year in this example, so we can calculate the internal rate of return as follows factor forthe _ __Investment required _ internal rate of return ~ Annual net cash flows $104, 320 Satna = 5.218 $20,000 Net Present Value Method The net present value of one project cannot be directly compared to the net present value of another project unless the investments are equal. ee 4/27/2024Other Approaches to Capital Budgeting Decisions | Other methods of making capital budgeting Tete include: 4. The Payback Method. | 2.Simple Rate of Return. Learning Objective Determine the payback period for an investment. 4/21/2023The Payback Method "|The payback period is the length of time that it fakes for a project to recover its initial cost out of the cash receipts that it generates. | |When the annual net cash inflow is the same | each year, this formula can be used to compute fae payback period: | Investment required | Payba nage nvestmenticequie les | ayback period = “Arnual net cash inflow ret _ Apostaudit is a follow-up after the project | : has been completed to see whether or not | |__expected result: ere actually realized. | 4/27/2023—— oe Se Introduction Tipe Hence, you can understand that good~|» financial management practices and a close scrutiny of the financial management practices in an organization can prove to be the difference between success and failure for any business. 4/21/2023 10i @rencel management is concerned with the acquisition, financing, and management of assets with some overall goal in mind. 1e art =i science of managing money. ' Financial management is the most essential requirement of any organized business or activity. E + Capitalization is generally found to be of the following types: * Normal — - Overcapitalization 4/21/2023 aFollowing are the main functions of a Financial ‘Manager’ [Raising of Funds: | [In order to meet the frcramne | obligation of the business it is important _ Markets [to have enough cash. een TY. e q meson PA oo cach ideal, Tax Reporting in Financial Management 4/27/2023An Introduction to Finance What is finance? «Finance is the study of the art and the science of mone management, he Three Primary Duties of the Financial Manager + The capital budgeting decision +The capital structure decision The working capital decision 4/27/2023eee Workshop Objectives & + Identify benefits of a financial literacy program {+ Describe features of model programs and identify cost effective ways to replicate + Identify funding and staffing possibilities + Discuss cost effective tools for training staff and volunteers + Analyze and organize available resources for teaching financial literacy ne ———————eeEE Workshop Agenda Why Programs Are Needed Define and Design Your Program sian Develop Your Program Content Implement Your Program ol ho Goa, 4/27/2023 14Why Programs are Needed? + Financial literacy — Why does it need our attention? + Benefits of program + Best practices of successful programs. Financial Literacy Why does it need our attention? 4/21/2023 15What is Financial Literacy in College? Why Get Involved? + Benefits students + Benefits families + Benefits communities + Benefits schools 4/21/2023 MG4/27/2023 Improve Graduation Rates + Assist students with work & school balance . Reduce number of students who face financial crisis during college « Reaffirm long-term value of postsecondary education Prepare student for financially stable path post-college ene Best Practices in Financial Literacy » Entrance and exit counseling + Student and parent orientation + Ongoing support beyond freshman year + Student success courses + Programs, seminars and workshops. + Just-in-time training and outreach + Money management counseling + Peer financial counseling + Use of technology + Long-term financial planning + Alumni programs poee eee Needs Assessment SWOT Matrix HELPFUL (oxyoutobecve) J Strengths: Summary . Financial Literacy is separate from financial aid . Financial Literacy Programs are necessary because they benefit + Students A + Families 4 - Communities oa + Schools , a . Establish a program by: . Relying on best practices of successful programs Capitalizing on your strengths 4/27/2023