Attention for M.com students

1. Finance
By: Noor ul hadi (Lecturer)
Govt College of Management Sciences
Peshawar

2. What is Finance
1. Finance is the art of to raise fund and best
allocation or utilization to achieve organizational
goal.
2. A branch of economics concerned with resource
allocation as well as resource management,
acquisition and investment. Simply, finance
deals with matters related to money and the
markets.

3. Finance vs Financing
Finance:
Finance is a branch of economics that deals with the
management of funds, financial resources and other
assets. In broader terms, finance is raising or investing
money either as equity or debt.
Financing:
The process or means of acquiring capital necessary to
conduct a business activity. Two of the most common
forms of financing are debt financing and equity
financing.

4. FINANCE (Functions)
F:- Financial Planning/ Forecasting
I:- Investment Decision
N:- Negotiation and Consultation
A:- Allocation of Funds
N:- Net Result Estimation or Standard Setting
C:- Control of Financial Resources
E:- Evaluation & Revision

5. F:- Financial Planning/ Forecasting
a. To determine the required amount of capital
b. To decide the sources of capital (fund)
a. Internal Sources (Owner Capital)
b. External Sources (Debt Capital/Leverage
Capital
c. To Finalize Capital Structure (Combination
of own & Debt capital ratio)
d. To Decide investment Mix– utilization of D/E
ratio.

6. I:- Investment Decision
Selection of Assets to be acquired for the
business.
a. Current Assets (Working Capital Management)
- Cash Management
- A/R Management
- Inventory Management
a. Fixed Assets (Capital Budgeting)
Capital Budgeting is to acquired long run Assets.

7. N:- Negotiation and Consultation
• Negotiation ad consultation with other
departmental heads so as to take positive
investment decision
MBO “Management by Objective.
Consultative and Participative Management.

8. A:- Allocation of Funds
Allocation of Fund among the selected
Assets.
• Investment in Capital Market
• Investment in Money Market.

9. N:- Net Result Estimation or Standard Setting
• Standards:
– Output Standard/Quantity Standard.
– Cost Standard.
– Quality Standard

10. C:- Control of Financial Resources
• Actual, Standard and Budgeting
– Minimizing the Variances to retain favorable
variances.
– Stock Control.
– Labor Cost Control
• Time In, Time Out, Time booked( time in work
operation)

11. E:- Evaluation & Revision
• Change required for improvement and
value of the firm.
• Change required for decision.
• The evaluation of things with standard.