Financial Management: Chapter 1

Reduction of chances of failures

A firm having latest technology, sophisticated machinery, high caliber marketing and technical experts, and so forth may still fail unless its finances are managed on sound principles of financial management.

Financial Management

All the activities concerned with obtaining money and using it effectively. Also referred to as managerial finance, corporate finance, and business finance. A decision making process with planning, acquiring, and utilizing funds in a manner that achieves the firm's desired goals.

Broad Applicability

Any organization whether motivated with earning profit or not having cash flow requires to be viewed from the angle of financial discipline.

Measurement of return on investment

Anybody who invest his money will expect to earn a reasonable return on his investment.

Investment Decisions

Are those which determine how scarce or limited resources in terms of funds of the business firms are committed to projects

Financing Decisions

Assert that the mix of debt and equity chosen to finance investments should maximize the value of investments made.

Microeconomics

Deals with the economic decisions of individuals and firms. It focuses on the optimal operating strategies based on the economic data of individuals and firms.

Accounting Function

Discharges the function of systematic recording of transactions relating to the firm's activities in the book of accounts and summarizing the same for presentation in the financial statements.

Financial Managers

In a business enterprise must make decision for the owners of the firm. He must act in the owners' or shareholders best interest by making decisions that increase the value of the firm or the value of the stock.

Financial Management

Is a part of a larger discipline called FINANCE which is a body of facts, principles, and theories relating to raising and using money by individuals, business, and governments.

Finance

Is an independent specialized function and is well knit with other functions.

Dividend Decisions

Is concerned with the determination of quantum of profits to be distributed to the owners, the frequency of such payments and the amounts to be retained by the firm.

Finance Function

Is considered a distinct and separate function rather than simply an extension of accounting function.

Financial Managers

Is to acquire funds needed by the firm and investing those funds in profitable ventures that will maximize the firm's wealth, as well as, generating returns to the business concern.

Macroeconomics

looks at the economy as a whole in which a particular business concern is operating. It provides insight into policies by which economic activity is controlled.