Topic-Objective of Financial Management

By Prof. Maithili Dhuri

Financial management is the managerial activity which

is concerned with planning and controlling of the firms
financial resources.



Finance and economics

Finance and accounting

Financial decision Areas

Primary Disciplines
1.
2.
3.
4.
5.
6.

Investment analysis
Working capital management
Sources and cost of fund
Determination of capital structure
Dividend policy
Analysis of risk and returns

Resulting in

Shareholder wealth maximization

Support

Support

1. Accounting
2. Macroeconomics
3. Microeconomics

Other Related Disciplines

1. Marketing
2. Production
3. Quantitative methods

Investment
Decision

The
Financing
Decision

The
Dividend
Policy
Decision

Capital Budgeting
1.
The long-term asset and
their composition
2.
The business risk
complexion of firm
3.
The concept and
measurement of cost of
capital

Working capital Management

1. An overview of working
capital management as a
whole
2. Efficient management of
individual current asset
such as cash ,receivable
and inventory

Financing decision relates to the choice of the proportion

of debt and equity source of financing
Optimum capital structure
1.
2.

The capital structure theory

The capital structure decision

Dealing Profit of firm

1.
They can be distributed to the shareholder in the form of
dividend
2.
They can be retained in the bossiness itself
Dividend Pay out ratio

1.

2.
3.

Performing financial analysis

and planning
Making investment decision
Making financing decision

Emerging Role of finance

manager in India
1.
2.
3.
4.
5.
6.

Financial structure
Foreign exchange management
Treasury operations
Investor communication
Management control
Investment planning

Profit (Total)/Earning per

share (EPS) maximization
approach
Main technical flaws of EPS
criterion
1. Ambiguity
2. Timing of benefits
3. Quality of benefits

Wealth maximization
approach
Main technical flaws of wealth
maximization criterion
1. Economic value added(EVA)
2. Focus on stakeholder

We are committed to inspiring communities around the world by

developing new technologies, innovative products and creative solutions.
We are also committed to creating a brighter future by developing new
value for our core networks: industry, partners and employees. Through
these efforts, we hope to contribute to a better world and a richer
experience for all.

As part of our new vision, we have mapped out a specific plan of reaching $400
billion in revenue and becoming one of the worlds top five brands by 2020. To this
end, we have also established three strategic approaches in our management:
creativity, partnership and talent.
We are excited about the future. As we build on our previous accomplishments,
we look forward to exploring new territories, including health, medicine and
biotechnology. We are committed to being a creative leader in new markets and
becoming a truly No. 1 business going forward.

Financial Planning is based on following

assumption:
1.
2.
3.
4.
5.

Economic assumption
Sales forecast
Pro-forma statements
Asset requirements
Financing Plan



Identifies advance actions to be taken in various area

Seeks to develop a number of option in various area that can be exercised
under different conditions.
Facilities a systematic exploration of interaction between investment and
financing decisions.
Clarifies the link between present and future decision
Forecasts what is likely to happen in future and helps in avoiding surprises
Ensure that the strategic plan of the firm is finacially viable
Provides benchmark against which future performance may be measured.