INTRODUCTION TO FINANCIAL

MANAGEMENT

BY: JANICE N. RAMIRO, MBA

OBJECTIVES
1. DEFINE FINANCE
2. DESCRIBE WHO ARE RESPONSIBLE FOR FINANCIAL
MANAGEMENT WITHIN AN ORGANIZATION
3. DESCRIBE THE ACTIVITES OF THE FINANCIAL MANAGER
4. DESCRIBE HOW FINANCIAL MANAGER HELPS IN
ACHIEVING THE GOAL OF THE ORGANIZATION
5. DESCRIBE THE ROLE OF FINANCIAL INSTITUTION AND
MARKETS
 DEFINITION OF BUSINESS FINANCE

Is the business activities which is

concern with the acquisition and
conversation of capital funds in meaning
financial needs and overall objectives of
business enterprise.
Money required for carrying out for
business activities.
 Quiz no.1 – 06-17-19
1.Acquisition 12.-15. Decision of Financial Management
2. Conversation of funds 15. Financial Management
3. Money 16. Cash Flow
4.Traditional 17.Capital
5.Modern 18. Cost
19. Dividednd
20. operating Efficiency
6.Traditional Approach
7.
8.
9.
10. Nicol
11. Modern
 DEFINITION OF FINANCIAL
MANAGEMENT

Isconcerned with optimal

procurement as well as
usage of finance.
 SCOPE of FINANCE

The approach to the scope and

functions of financial management is
divided to the purpose of exposition in
two broad categories:
1. TRADITIONAL APPROACH
2. MODERN APPROACH
 Traditional
Approach

The traditional approach is popular in

early stage limited the role of financial
management to raising and
administering funds needed by
corporate enterprises to meet their
financial needs.
 MAIN LIMITATION OF
TRADITIONAL APPROACH

Ignore routine problems,

Ignore finance managers view
Ignore non corporate enterprise
No emphasis on allocation of funds
 MODERN APPROACH

The term financial provides a

conceptual and analytical
framework for financial decisions.
 Major Decisions of Financial
Management

1. Financial Decision
2. Investment Decision
3. Dividend Decisions
 Financial Decisions

Financial
Financial Investment Dividend
Decisions
Decisions Decisions Decisions

Working
Capital Patronage refund
Capital
Budgeting
Management
Capital
Cost of structure Income distribution
Capital
INVESTMENT DECISIONS

This decisions relate to how

firms are invested in different
assets so that they can be able to
earn highest possible return for
their investors.
 FACTORS AFFECTING
INVESTMENT DECISION

 Cash flows of the project

 Rate of return
 Investment criteria.
 FINANCIAL DECISION
> About the quantum of finance
to be raised from various long
term sources.
> Main source of funds are
stakeholders and borrowed funds
FACTORS AFFECTING FINANCIAL
DECISION
 cost
 risk
 floatation cost
 cash flow position of the
business
 DIVIDEND DECISION
Is the portion of profit which is
distributed to the
stakeholders/members
 How much profit is to be distributed
and how much will be retained for
investment
 FACTORS that AFFECTS
DIVIDEND DECISION
 Earnings
Stability of earnings
 Stability of dividend
 Growth of opportunities
 How financial managers helps in achieving the
goal of the organization

1. Financial Planning > essentially

prepare the financial blueprint of n
organization future operation.
 How financial managers helps in achieving the
goal of the organization

2. Fixed capital > refers to investment

in long term assets.
> affect the growth and profitability
risk of the business in a long run.
operation.
Factors that affects the achieving the goal of
the organization

Nature of Business
Scale of Operation
Choice of Techniques
Technology upgration
Operating Efficiency
Factors that affects the achieving the goal of
the organization

Nature of business
Scale of Operation
Business Cycle
> Operating Efficiency
How financial managers helps in achieving the
goal of the organization
3.Working capital
are investment which facilitate smooth
day to day operation of the business

usually more liquid but contribute less

to the profit than fixed assets.
INSTRUMENT OF FINANCE