FINANCIAL

MANAGEMENT
“Any fool can lend money, but it takes a lot of skill to get it back” 
Financial Management

 FinancialManagement is the process of acquiring

funds optimally and utilizing them in the best
possible manner to maximize shareholders’
wealth.
Objectives of Financial Management

 Wealth maximization
The ability of the company to increase the value of its stock
 for all the stakeholders is referred to as Wealth
Maximization.

 Profit maximization
The process of increasing the profit earning capability
of the company is referred to as Profit Maximization.
Objectives of Financial Management
Objective of Corporate Management
Principle

 The fundamental objective of corporate governance is to

enhance shareholders' value and protect the interests of
other stakeholders by improving the corporate performance
and accountability.
 Adequate disclosures and effective decision making to
achieve corporate objectives;
 Transparency in business transactions;
 Statutory and legal compliances;
 Protection of shareholder interests;
 Commitment to values and ethical conduct of business.
Agency Problem

 the agency problem usually refers to a

conflict of interest between a company's
management and the company's
stockholders.
 Café Coffee Day and
 Mind Tree Case
Functions of a financial manager

 1. Estimating the Amount of Capital Required

 2. Determining Capital Structure
 3. Choice of Sources of Funds
 4. Procurement of Funds
 5. Utilization of Funds
 6. Disposal of Profits or Surplus
 7. Management of Cash
 8. Financial Control.
Scope of Financial Management

 Estimating financial requirement 

 Deciding capital structure
 Selecting a source of finance
 Selecting a pattern of Investment 
 Proper cash management
 Implementing financial controls
 Proper use of surpluses
Mind Map
Case 1

 Arun is a successful businessman in the paper industry. During his recent

visit to his friend’s place in Mysore, he was fascinated by the exclusive
variety of incense sticks available there. His friend tells him that Mysore
region is known as a pioneer in the activity of Agarbathi manufacturing
because it has a natural reserve of forest products especially Sandalwood
to provide for the base material used in production. Moreover, the
suppliers of other types of raw material needed for production follow a
liberal credit policy and the time required to manufacture incense sticks
is relatively less. Considering the various factors, Arun decides to
venture into this line of business by setting up a manufacturing unit in
Mysore.
In context of the above case:
 Q1.Identify and explain the type of financial decision taken by Arun.
 Q2.Identify the three factors mentioned in the paragraph which are likely
to affect the working capital requirements of his business.
THANK YOU