FINANACIAL MANAGEMENT

Dr.S.M.UVANESWARAN
MBA DEPT.

Prepared by

Finance

management of flow of money through an organization. It is concerned with application of skill in manipulation, use and control of money.

Interpretation of finance

Providing of funds needed by a business on most suitable terms. confines to raising of funds and to study of financial institutions and instruments from where the funds can be procured. Means to cash Concerned with raising of funds and their effective utilization.

Importance of Finance

Finance is the lifeblood of the business. It is very essential to smooth running of the business. It is termed as Universal lubricant, which keeps the enterprise dynamic. It is Difficult to start (big/medium/small) business without adequate amount of funds.

Finance is required right from beginning Conceiving an idea to business To promote / establish the business Acquire fixed assets Make market investigations such as market survey etc., to develop market. Keep men and machine at work Encourage management to make progress and create values.

Business Finance

creative human activities relating Production and distribution of goods and services for satisfying the human wants. It includes which indirectly help in production and exchange of goods such as Transport, insurance, banking and warehousing. It also includes Industry, trade and commerce.

Meaning of Business finance

an activity or a process, which is concerned with acquisition of funds and distribution of profits by a business firm. It deals with Financial Planning Acquisition of funds Use of funds Allocation of funds Financial controls

Classification of Business Finance

Sole proprietorship Finance Partnership Finance Company or Corporate Finance

Financial Management

It also termed as business finance or corporate finance. It refers to that part of management activity which is concerned with the planning and controlling of firms financial resources. It deals with finding out suitable sources of funds and economical for the needs of business.

Objectives of Finance
1.

Profit Maximization Profit earning is the main of every economic activity. Must earn profit to cover its costs and provide funds for growth. No business can survive without earning profit. Profit is a measure of efficiency of a business enterprise. It also serves as a protection against risks.

Accumulated profits are utilized to face risks like fall in prices, competition from other units, adverse govt. policies. Past earnings help the business to survive under unfavorable situation It acts as the main source of finance for the growth of a business and it is essential for fulfilling social goals

Criticism of profit maximization objective

starts exploiting workers and the consumers immoral and leads to a number of corrupt practices. leads to colossal inequalities and lower human values essential for ideal social system

Profit Max. is rejected because of

Profit is vague and it cant be defined. It ignores time value of money It does not consider the risk of the prospective earnings stream It is also not considered about the effect of dividend policy on the market share rather than earning per share.