basics of finance

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Information about basics of finance

Published on January 30, 2016

Author: ayushijain107



2. Made BY AYUSHI JAIN MBA(4th semester)

3. • Meaning of Finance • Features of Finance • Scope of Finance • Aim of Finance • Role of Finance Manager (Traditional+ Modern) • General organizational structure of Finance Function • Importance of Finance in organization through an Example

4. • Finance is a management of money and other valuables, which can be easily converted into cash. • Finance is concerned with the maintenance and creation of economic value or wealth. • A science that describes the management, creation and study of money, banking, credit, investments, assets and liabilities.

5. Features of Finance • Channelizing funds- Financial sector and financial markets perform the essential function of channeling funds from people who have surplus to people who have mutual fund • Acquisition, Allocation & Utilization of funds- Business needs to decide about mode of raising funds. once funds are acquired, they have to be allocated to various projects and services. business should ensure that the funds are utilized efficiently and effectively to achieve its objectives. • Maximization of shareholder’s wealth- Finance helps in defining policies and efficient management of working capital in order to achieve its wealth maximization objective.

6. …continued • Future decision making- Finance is concerned with future decisions of organization. Sound decision making is possible only through proper analysis of financial needs and availability. E.g.- capital budgeting • Optimal mix of funds- It is concerned with best optimal mix of funds in order to obtain desired and determined results. The composition of funds should not result in loss. • Investment opportunities- Investment means utilization of money for profit or investment in mutual fund or financial securities or in land, etc.

7. Scope of Finance • Public finance- To deal with governmental financial problems, separate and specialized field of finance has emerged as public finance with not for profit goals. • Security and investment analysis- This area is of interest to individual and institutional investors. It covers mainly measurement of risk and return on investment in securities. • Institutional finance- It deals with issues of capital formation and the organizations that perform the financing function of the banks

8. …continued • International finance- It studies economic transactions among nations, corporations and individually internationally. It is concerned with flows of money across international boundaries. • Financial management- Business firms face problems dealing with acquisition of funds and optimum methods of employing the funds. Thus, it helps firm in seeking low cost funds for individual firms and seek profitable business opportunities.

9. AIM OF FINANCE FUNCTION • Anticipation of funds needed- Before anything, there is a need to evaluate available assets and projects. Selection of assets or projects takes place only after proper evaluation, which is helpful to anticipate the funds required for financing them. • Acquire the anticipated funds- The prime objective of finance function is to assess the required needs of a firm and then arrange the funds needed by raising from suitable source.

10. …continued • Allocation and utilization of funds- Efficient allocation and utilization of funds is the objective of traditional finance function. Efficient allocation means investing funds on profitable projects and such operations that help to maximize shareholder’s wealth. • Increase profitability- Proper planning and control of finance function aim at increasing profitability of the firm. It is important to arrange sufficient funds at right time and on right asset. • Maximizing firm’s value- Every firm strives to maximize its value by taking right decisions. Thus, it is one of the main objectives of finance function.

11. New role of Finance manager in Contemporary Scenario • Finance manager acts as central in audit and control practices in an organization • He acts as central in strategic alliances like Mergers & Acquisitions. • To work across the functional divide of the company and exhibit leadership skills. • Continuous focus and commitment towards value creation of an organization.


13. • Treasurer- He is concerned mainly with financing and investment activities including cash management, relationship management with bankers, credit ,management, portfolio management, inventory management, dividend disbursement, etc. • Controller- His functions are related to management and control of assets like cost and financial accounting, taxation, auditing, budget preparation, etc.

14. Importance of Finance in a Business organization through an example

15. Imagine a situation… • You are the owner of ABC firm and you get 2 proposals for investing in a project that costs Rs.5 lakhs and Rs.8 lakhs respectively. Now there are maximum three moves which you can make in this situation- 1. Accept both 2. Reject both 3. Choose either of the two

16. Solution • Analyze the data of both proposals. • Apply several financial tools and techniques on the data available. Example- pay back period technique. • Evaluate your findings. • Take decision. • Make plan for acquiring, allocating and utilising of funds. • Implement plan. • Monitor all activities.

17. Any Questions?

18. Thank you !

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