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Financial management is broadly concerned with the acquisition and use of funds by a business firm.

In other words, FM is planning, directing, monitoring, organizing, and controlling of the monetary resources of an organization. FM scope may be defined in terms of the following questions: 1. How large should the firm be and how fast should it grow? 2. What should be the composition of the firms assets? 3. What should be the mix of the firms financing? 4. How should the firm analyze, plan, and control its financial affairs? Functions Of Financial Management 1. Financial Planning: It is the duty of management to ensure the adequate funds are available to meet the needs of the business. In the short term, funds are required to pay the employers or to invest in stocks. In the middle and long term funds are required to make additions to the productive capacity of the business. 2. Financial Control: Financial control helps the business to ensure that it is meeting its goals. Through financial control the firm decides how much to invest in short term assets and how to raise the required funds. 3. Financial Decision Making: The three primary aspects of financial decision making are investment, financing and dividends. Investment must be financed in some way for which various alternatives are available. A financing decision is to retain the profits earned by the business or should it should be distributed among the shareholders via dividends. Goals of Financial Management The goals of financial management can be wide ranging depending on whether we are talking about personal finances, corporate finances, portfolio management etc. From the perspective of personal finance, your goals of financial management will vary greatly depending on your financial condition, your aspirations, your life circumstances etc. This article will discuss financial goal setting for your personal finances. The intent is to provide you with some guidance and help you set your own personal financial goals. We will look at "reasons" for goals and then take a peak at a few "types" of goals. Reasons for Financial Goals Setting goals is an absolute MUST! You should always know where you're going or where you want to be. Having a goal prevents you from wasting time, energy and other precious resources and prevents your financial condition from wandering aimlessly and direction-less. Defining your goals will set in motion a series of very important actions and decisions that will "shape" your financial plan. As a result, defining your goals helps ensure you achieve them; without a conscious goal, achieving them is purely random or lucky or fortunate (however you choose so see it). Three decision categories are significantly impacted when you define your goals and begin to build a plan to achieve them. 3 Key Reasons for Goals: Decision Factors 1. Budget Decisions Setting financial goals will shape your subsequent budget decisions in many important ways. By declaring a target such as Debt Free or Buy a New House you will be defining how you should prioritize aspects of your budget. A goal can force discretionary spending to be reallocated in support of achieving the goal rather than being thoughtlessly spent money. If debt free is your highest priority then you clearly have prioritized that debt servicing payments are more important than maybe dining out or entertainment.

Buying a new house might mean that you have to increase your liquidity for a down payment or if you have a credit problem, you might be focused on addressing a particular debtor so that you can get approval. Goal setting with have significant impact on your budget so it's an important step before actually building your budget. 2. Financing Decisions By establishing your own personal goals of financial management you are also defining how your next financing decision should be made. Whether your financing a home, automobile, furniture or appliances, your personal financial goals should shape that decision. Let's say you have enough "cash" to pay for that new washer & dryer you need because your old one "messed itself" (and your laundry room). Should you pay for it outright or finance it? Should you go with financing offered by the retailer or put it on your credit card? Your decision depends on many factors but surely without an overall financial goal you won't have the insight to know if liquidity or cash flow is more important at this time in your life. 3. Investment Decisions Setting financial goals will surely shape how you chose to make investments. Depending on the time frame of your goals, (long term vs. short term) goals can play a factor in dictating your risk tolerance or your ability to weather the storm of wide variations in market value. Like budgeting decisions, goals of financial management will influence whether you allocate funds towards dollar cost averaging strategies with a mutual fund or index fund or if you should be looking at those stock picks your co-worker was boasting about. There are literally countless reasons you should have financial goals. The 3 listed above are broad categories that should capture 80% of those reasons. If you have goals and have determined your starting point by assessing your cash flow and net worth then you're ready to begin putting together a financial plan to achieve those goals. If you have not determined your baseline (where you're starting from) you will need to do so. You can start with determining your net worth and then move into assessing your cash flow. Once you've completed these two important baselining tasks you're ready for this part of goal setting, types of goals. What are the goals of Financial Management? The financial management has to take three important decision viz. (i) Investment decision i.e., where to invest fund and in what amount, (ii) Financing decision i.e., from where to raise funds and in what amount, and (iii) Dividend i.e., how much to pay dividend and how much to retain for future expansion. In order to make these decisions the management must have a clear understanding of the objective sought to be achieved. It is generally agreed that the financial objective of the firm should be maximization of owner's economic welfare. There are two widely discussed approaches or criterion of maximizing owners' welfare -(i) Profit maximization, and (ii) Wealth maximization. It should be noted here that objective is used in the sense of goal or goals or decision criterion for the three decisions involved. Profit Maximization: Maximization of profits is very often considered as the mainobjective of a business enterprise. The shareholders, the owners of the business, invest their funds in the business with the hope of getting higher dividend on their investment. Moreover, the profitability of the business is an indicator of the sound health of the organisation, because, it safeguards the economic interests of various social groups which are directly or indirectly connected with the company e.g. shareholders, creditors and employees. All these parties must get reasonable return for their contributions and it is possible only when company earns higher profits or sufficient profits to discharge the obligations to them.

Wealth Maximization: The wealth maximization (also known as value maximization or Net Present Worth Maximization) is also universally accepted criterion for financial decision making. The value of an asset should be viewed in terms of benefits it can produce over the cost of capital investment. Types of Personal Financial Goals In personal finance the goals of financial management can be categorized into very common and consistent themes. 1. Positive Cash Flow Sounds simple and makes sense but apparently it's incredibly difficult. This one is not as much about getting your finances organized and prioritized. This one boils down to personal discipline and personal priorities. 2. Emergency Cash Reserve Another unpopular but important goal! Establishing a cash reserve is a financial goal that will be defined by your situation. Some folks need to settle on just getting $1000 into a savings/money market account so they can focus on other immediate goals. Other people might be in a better position where augmenting their cash position (6, 8 or 12 months of income) is their immediate priority. 3. Eliminate Debt Now here's a goal that just about everyone can relate to. If you can't you shouldn't be reading this article you should be writing it. Getting out of debt is a financial goal that seems quite elusive. Not only should you focus on eliminating debt but if you're not also focused on changing the habits that got you there then you'll eventually find yourself back where started. If you have mounting debt challenges and could use debt management help, Smart Debt Solutions is a blog reference that might help by providing advice and information on debt consolidation, settlement and counseling. Another good resource available to you if your debt is specific to credit cards is Credit Card Debt Relief Info. The site found at that link is a great real life credit card debt management website that can help you get out of credit card debt. 4. Build Liquidity This goal is the follow-on to the emergency reserve. The meltdown of our financial system in 2008 and the recession of 2009 emphasizes the importance of your ability to sustain during long periods of financial distress. 2008 & 2009 redefined what most people once considered liquid and set a new stage for your need to be truly liquid. 5. Build Wealth Your Net Worth should be the measure of success when focusing on building wealth. This goal is one that will have you set on increasing assets and eliminating liabilities. Most of everything you do in achieving any financial goals will help in building your wealth. How you approach a specific wealth building strategy may differ from others but the consistent measure will be your net worth. 6. College Savings For family's with children, saving for college is a big challenge. Some family's ignore it and assume that college loans are the answer for their children. Nothing could help your child get ahead in life more than helping pay for college. There are many savings options for college funds . Determining how you achieve this goal is just as important as choosing to make it a goal. 7. Wedding

Another major lifetime expense is the celebration of a marriage. This savings goal understandably ranks lower in priority for most family's but can still be one of the key goals of financial management for many family's. 8. Pay-off Mortgage Something you're likely to do through time alone if you have a standard fixed rate 15, 20 or 30 year amortized loan. Nonetheless, paying off a mortgage (early or not) is a significant financial goal for people closing in on retirement. 9. Retirement The ultimate in financial goals. You can't work your whole life and if you could you probably don't want to. Preparing for a time when income from employment is no longer a possibility or no longer desired, retirement is the holy grail of goals in financial management. For expert advice on how to find the best places to retire, that could also help you make your retirement budget go further, check out RetirePedia.com Establishing goals of financial management for your personal finances is a critical factor. Don't get caught up in your financial life without a plan or some focused objectives. It's the surest way to waste your resources, time and emotional energy. Time is the biggest factor that is typically on your side when it comes to achieving most of these goals. Use goals, time, discipline and the information & resources we offer to help achieve your financial goals. Chapter 1: Introduction to financial management Aims of the chapter This chapter is clearly one of the most important in the subjectguide because it deals with the fundamentals of financialmanagement. Without a clear understanding of the fundamentalsthe remainder of this subject will not be easy to grasp. As with anysubject area, a knowledge of the background, the environment towhich the subject relates, is important as it helps to put everythinglearnt later into appropriate perspective. The chapter starts by looking at the key tasks of financialmanagement. Since knowledge of the financial environment is vitalto managers this comes next before the review of the differing forms of business that are in use. An outline of corporate objectives follows because these form thebasis of much of the theory that is covered in this subject. The rolesof financial managers come next, to be followed by a discussion ofsome of their conflicts of interest and how they might be resolved. One area of major interest is the corporate governance debate on how the relationship between owners and controllers should besystemised to maximise the corporate gain. The unit 25 Principles of accounting, if studied carefully and fully, should have meant you already have all this background knowledge. If that is true, then perhaps only a quick review of this subject matter is necessary, but if the practise questions and problem(s) here and in the essential text cause you any problems, then a more detailed and careful review of your prerequisite unit may be needed. Key tasks of financial management There are five key tasks undertaken in financial management _ financial planning _ investment project appraisal _ financial decisions _ capital market operations _ financial control. Financial planning provides the means, through plans and projections, to evaluate the proposed courses of action. Similarl financial control deals with the ways and means by which the plans are achieved. The next two tasks, investment project appraisal and financing decisions are seen by some, including Brealey and Myers, as the two most important tasks. Investment project appraisal is the assessment and evaluation of the relative strengths of a companys investment propositions. The financing decisions involve the identification and choice of the sources of funds which will provide the cash to be invested into the selected projects. Part of the finance function is dealing with the capital market since a large part of the finance is obtained through

the capital market, not least those funds provided by the equity owners, the ordinary shareholders. This function does not just deal with the raising of funds but also with the ongoing relationship between the company and the market place; information

Chapter No. 2 - Time Value of Money Contents

Introduction to the concept of inflation Wholesale Price Index and Consumer Price Index

Money losing value due to reduction in purchasing power

Concept of interest as compensation in purchasing power of money

Four tier structure for rates of interest in any economy

Compounding and discounting processes

Application of time value of money to business decisions

Numerical exercises for practice

Chapter 3 Risk and Return Contents Risk and return go together Probability distribution of all possible outcomes in terms of return Measuring risk so as to expect adequate return Weighted average return, Standard deviation and the Co-efficient of variation Risk in a portfolio context introduction to a portfolio of securities Types of risk associated with investment in a portfolio systemic and nonsystemic Concept of Beta and Capital Asset Pricing Model Volatility and Risk Some concerns about Beta and the CAPM Numerical exercises in risk and return Chapter 3 Risk and Return

Contents Risk and return go together Probability distribution of all possible outcomes in terms of return Measuring risk so as to expect adequate return Weighted average return, Standard deviation and the Co-efficient of variation Risk in a portfolio context introduction to a portfolio of securities Types of risk associated with investment in a portfolio systemic and nonsystemic Concept of Beta and Capital Asset Pricing Model Volatility and Risk Some concerns about Beta and the CAPM Numerical exercises in risk and return

Basics of Financial Management Role of Treasurer and Board Finance Committee If your small business is a corporation, you would do well to find someone experienced in financial management and encourage them to be your board treasurer (your board chair has this responsibility to find someone suitable, as well). Therefore, it's important to understand the role of the board treasurer.

Budgeting and Managing a Budget A budget depicts what you expect to spend (expenses) and earn (revenue) over a time period. Amounts are categorized according to the type of business activities, or accounts (for example, telephone costs, sales of catalogs, etc.). Budgets are useful for planning your finances and then tracking if you're operating according to plan. They are also useful for projecting how much money you'll need for a major initiative, for example, buying a facility, hiring a new employee, etc. There are yearly (operating) budgets, project budgets, cash budgets, etc. The overall format of a budget is a record of planned income and planned expenses for a fixed period of time. Managing Cash Flow As a new business, your biggest challenge is likely to be managing your cash flow -- probably the most important financial statement for a new business is the cash flow statement. The overall purpose of managing your cash flow is to make sure that you have enough cash to pay current bills. Businesses can manage cash flow by examining a cash flow statement and cash flow projection. Basically, the cash flow statement includes total cash received minus total cash spent. Cash management looks primarily at actual cash transactions.

1. statistics The branch of mathematics that deals with the collection, organization, and evaluation of data. Statistics is useful to businesses that wish to evaluate the characteristics of various populations. For example, statistics might be used to determine what types of advertising are most effective in attracting the attention of wealthy retirees.

Descriptive Statistics Descriptive statistics are used to describe the basic features of the data in a study. They provide simple summaries about the sample and the measures. Together with simple graphics analysis, they form the basis of virtually every quantitative analysis of data. Descriptive statistics are typically distinguished from inferential statistics. With descriptive statistics you are simply describing what is or what the data shows. With inferential statistics, you are trying to reach conclusions that extend beyond the immediate data alone. For instance, we use inferential statistics to try to infer from the sample data what the population might think. Or, we use inferential statistics to make judgments of the probability that an observed difference between groups is a dependable one or one that might have happened by chance in this study. Thus, we use inferential statistics to make inferences from our data to more general conditions; we use descriptive statistics simply to describe what's going on in our data. Descriptive Statistics are used to present quantitative descriptions in a manageable form. In a research study we may have lots of measures. Or we may measure a large number of people on any measure. Descriptive statistics help us to simply large amounts of data in a sensible way. Each descriptive statistic reduces lots of data into a simpler summary. For instance, consider a simple number used to summarize how well a batter is performing in baseball, the batting average. This single number is simply the number of hits divided by the number of times at bat (reported to three significant digits). A batter who is hitting .333 is getting a hit one time in every three at bats. One batting .250 is hitting one time in four. The single number describes a large number of discrete events. Or, consider the scourge of many students, the Grade Point Average (GPA). This single number describes the general performance of a student across a potentially wide range of course experiences. Univariate Analysis Univariate analysis involves the examination across cases of one variable at a time. There are three major characteristics of a single variable that we tend to look at: the distribution the central tendency the dispersion

y y y

In most situations, we would describe all three of these characteristics for each of the variables in our study. The Distribution. The distribution is a summary of the frequency of individual values or ranges of values for a variable. The simplest distribution would list every value of a variable and the number of persons who had each value. For instance, a

typical way to describe the distribution of college students is by year in college, listing the number or percent of students at each of the four years. Or, we describe gender by listing the number or percent of males and females. In these cases, the variable has few enough values that we can list each one and summarize how many sample cases had the value. But what do we do for a variable like income or GPA? With these variables there can be a large number of possible values, with relatively few people having each one. In this case, we group the raw scores into categories according to ranges of values. For instance, we might look at GPA according to the letter grade ranges. Or, we might group income into four or five ranges of income values.

Table 1. Frequency distribution table.

One of the most common ways to describe a single variable is with a frequency distribution. Depending on the particular variable, all of the data values may be represented, or you may group the values into categories first (e.g., with age, price, or temperature variables, it would usually not be sensible to determine the frequencies for each value. Rather, the value are grouped into ranges and the frequencies determined.). Frequency distributions can be depicted in two ways, as a table or as a graph. Table 1 shows an age frequency distribution with five categories of age ranges defined. The same frequency distribution can be depicted in a graph as shown in Figure 2. This type of graph is often referred to as a histogram or bar chart.

Table 2. Frequency distribution bar chart.

Distributions may also be displayed using percentages. For example, you could use percentages to describe the: percentage of people in different income levels percentage of people in different age ranges percentage of people in different ranges of standardized test scores

y y y

Central Tendency. The central tendency of a distribution is an estimate of the "center" of a distribution of values. There are three major types of estimates of central tendency: Mean Median Mode

y y y

The Mean or average is probably the most commonly used method of describing central tendency. To compute the mean all you do is add up all the values and divide by the number of values. For example, the mean or average quiz score is determined by summing all the scores and dividing by the number of students taking the exam. For example, consider the test score values: 15, 20, 21, 20, 36, 15, 25, 15 The sum of these 8 values is 167, so the mean is 167/8 = 20.875. The Median is the score found at the exact middle of the set of values. One way to compute the median is to list all scores in numerical order, and then locate the score in the center of the sample. For example, if there are 500 scores in the list, score #250 would be the median. If we order the 8 scores shown above, we would get: 15,15,15,20,20,21,25,36 There are 8 scores and score #4 and #5 represent the halfway point. Since both of these scores are 20, the median is 20. If the two middle scores had different values, you would have to interpolate to determine the median. The mode is the most frequently occurring value in the set of scores. To determine the mode, you might again order the scores as shown above, and then count each one. The most frequently occurring value is the mode. In our example, the value 15 occurs three times and is the model. In some distributions there is more than one modal value. For instance, in a bimodal distribution there are two values that occur most frequently. Notice that for the same set of 8 scores we got three different values -- 20.875, 20, and 15 -- for the mean, median and mode respectively. If the distribution is truly normal (i.e., bell-shaped), the mean, median and mode are all equal to each other. Dispersion. Dispersion refers to the spread of the values around the central tendency. There are two common measures of dispersion, the range and the standard deviation. The range is simply the highest value minus the lowest value. In our example distribution, the high value is 36 and the low is 15, so the range is 36 - 15 = 21. The Standard Deviation is a more accurate and detailed estimate of dispersion because an outlier can greatly exaggerate the range (as was true in this example where the single outlier value of 36 stands apart from the rest of the values. The Standard Deviation shows the relation that set of scores has to the mean of the sample. Again lets take the set of scores:

15,20,21,20,36,15,25,15 to compute the standard deviation, we first find the distance between each value and the mean. We know from above that the mean is 20.875. So, the differences from the mean are: 15 - 20.875 = -5.875 20 - 20.875 = -0.875 21 - 20.875 = +0.125 20 - 20.875 = -0.875 36 - 20.875 = 15.125 15 - 20.875 = -5.875 25 - 20.875 = +4.125 15 - 20.875 = -5.875 Notice that values that are below the mean have negative discrepancies and values above it have positive ones. Next, we square each discrepancy: -5.875 * -5.875 = 34.515625 -0.875 * -0.875 = 0.765625 +0.125 * +0.125 = 0.015625 -0.875 * -0.875 = 0.765625 15.125 * 15.125 = 228.765625 -5.875 * -5.875 = 34.515625 +4.125 * +4.125 = 17.015625 -5.875 * -5.875 = 34.515625 Now, we take these "squares" and sum them to get the Sum of Squares (SS) value. Here, the sum is 350.875. Next, we divide this sum by the number of scores minus 1. Here, the result is 350.875 / 7 = 50.125. This value is known as the variance. To get the standard deviation, we take the square root of the variance (remember that we squared the deviations earlier). This would be SQRT(50.125) = 7.079901129253. Although this computation may seem convoluted, it's actually quite simple. To see this, consider the formula for the standard deviation:

In the top part of the ratio, the numerator, we see that each score has the the mean subtracted from it, the difference is squared, and the squares are summed. In the bottom part, we take the number of scores minus 1. The ratio is the variance and the square root is the standard deviation. In English, we can describe the standard deviation as: the square root of the sum of the squared deviations from the mean divided by the number of scores minus one

Types of data Qualitative data Qualitative data is a categorical measurement expressed not in terms of numbers, but rather by means of a natural language description. In statistics, it is often used interchangeably with "categorical" data.

For example: favorite color = "blue" height = "tall"

Although we may have categories, the categories may have a structure to them. When there is not a natural ordering of the categories, we call these nominal categories. Examples might be gender, race, religion, or sport. When the categories may be ordered, these are called ordinal variables. Categorical variablesthat judge size (small, medium, large, etc.) are ordinal variables. Attitudes (strongly disagree, disagree, neutral, agree, strongly agree) are also ordinal variables, however we may not know which value is the best or worst of these issues. Note that the distance between these categories is not something we can measure. Quantitative data Quantitative data is a numerical measurement expressed not by means of a natural language description, but rather in terms of numbers. However, not all numbers are continuous and measurable. For example, the social security number is a number, but not something that one can add or subtract. For example: favorite color = "450 nm" height = "1.8 m"

Quantitative data always are associated with a scale measure. Probably the most common scale type is the ratio-scale. Observations of this type are on a scale that has a meaningful zero value but also have an equidistant measure (i.e., the difference between 10 and 20 is the same as the difference between 100 and 110). For example, a 10 year-old girl is twice as old as a 5 year-old girl. Since you can measure zero years, time is a ratio-scale variable. Money is another common ratio-scale quantitative measure. Observations that you count are usually ratio-scale (e.g., number of widgets). A more general quantitative measure is the interval scale. Interval scales also have a equidistant measure. However, the doubling principle breaks down in this scale. A temperature of 50 degrees Celsius is not "half as hot" as a temperature of 100, but a difference of 10 degrees indicates the same difference in temperature anywhere along the scale. The Kelvin

temperature scale, however, constitutes a ratio scale because on the Kelvin scale zero indicates absolute zero in temperature, the complete absence of heat. So one can say, for example, that 200 degrees Kelvin is twice as hot as 100 degrees Kelvin.

Primary and Secondary Data Data can be classified as either primary or secondary. Primary Data Primary data means original data that have been collected specially for the purpose in mind. It means when an authorized organization or an investigator or an enumerator collects the data for the first time himself or with the help of an institution or an expert then the data thus collected are called primary data. Research where one gathers this kind of data is referred to as field research. Secondary Data Secondary data are data that have been collected for another purpose and where we will use Statistical Method with the Primary Data. It means that after performing statistical operations on Primary Data the results become known as Secondary Data.