Complete intro to finance

1. Introduction to Financial
Management

2. • Faculty Name- Sheetal Jangid
• Designation- Asst. Prof.
• Department- MBA
• Subject- FM
• Subject code- M-203
• Semester- II

3. MEANING & DEFINITION OF FINANCE
• Finance may be defined as the art and science of managing money. It
includes financial service and financial instruments. Finance also is referred
as the provision of money at the time when it is needed. Finance function is
the procurement of funds and their effective utilization in business
concerns.
• The concept of finance includes capital, funds, money, and amount. But
each word is having unique meaning. Studying and understanding the
concept of finance become an important part of the business concern.
According to Khan and Jain, “Finance is the art and science of managing
money”.

4. DEFINITION OF FINANCIAL
MANAGEMENT
• Financial management is an integral part of overall management. It is
concerned with the duties of the financial managers in the business firm.
• The term financial management has been defined by Solomon, “It is
concerned with the efficient use of an important economic resource namely,
capital funds”.
Thus, Financial Management is mainly concerned with the effective funds
management in the business. In simple words, Financial Management as
practiced by business firms can be called as Corporation Finance or Business
Finance.

5. SCOPE OF FINANCIAL MANAGEMENT
• Financial Management and Economics
• Financial Management and Accounting
• Financial Management or Mathematics
• Financial Management and Production Management
• Financial Management and Marketing
• Financial Management and Human Resource

6. OBJECTIVES OF FINANCIAL
MANAGEMENT

9. FUNCTIONS OF FINANCE MANAGER
• Forecasting Financial Requirements
• Acquiring Necessary Capital
• Investment Decision
• Cash Management
• Interrelation with Other Departments

10. Interface of Financial Management with
other functional areas
• Financial Management and Economics
• Financial Management and Accounting
• Financial Management or Mathematics
• Financial Management and Production Management
• Financial Management and Marketing
• Financial Management and Human Resource

11. Indian financial system
• The financial system acts as a connecting link between savers of
money and users of money and thereby promotes faster economic
and industrial growth.
Efficient functioning of the financial system enables proper flow of
funds from investors to productive activities which in turn facilitates
investment.

12. Indian financial system
Financial Market
Financial Institutions
Financial Instruments
Financial services

14. Capital Market
• Primary Market: It is a market for new issue of
securities, which are issued to the public for first time. It
is also called as New Issue Market.
• Secondary Market: In the secondary market, there is
a sale of secondary securities. It is also called as Stock
Market. It facilitates buying and selling of securities.

15. Government Securities Market
In this market, government securities are bought and sold.
It is also called as Gilt-Edged Securities Market. The
securities are issued in the form of bonds and credit notes.
The buyers of such securities are:-
• Insurance Companies
• Provident funds
• RBI and Individuals

16. Long-Term Loans Market
• Term Loans Market: Banks and Financial Institutions provide term
loans to companies for a period of one year. The financial institutions help
in recognizing investment opportunities to motivate emerging
businessmen. They also give encouragement to modernization.
• Mortgages Market: It provides loans against securities of immovable
assets like land and buildings.
• Financial Guarantees Market: Financial Institutions (FIS) and banks
provide financial guarantees on behalf of their clients to third parties.

17. Unorganized Market
• Money Lenders: Money Lenders lend money to
individuals at a high rate of interest.
• Indigenous Bankers: They operate like money
lenders. They also accept deposits from public.
• Chit Funds: These collect funds from members and
provide loans to members and others.

18. Organized Money Market:
• Treasury Bills: To raise short term funds treasury bills are issued by Government. It is
purchased by Commercial Banks. At present, Government issues 91 days and 364 days
treasury bills.
• Commercial Paper (CP): Commercial paper is issued by companies who are listed on
Stock Exchange. CP is issued at discount and repaid at face value. The maturity period
ranges from 7 days to one year. CP's are issued in multiple of 5 lakh. The company issuing
CP must have tangible net worth of at least 4 crore.
• Certificate Of Deposit (CD): CD's are used by Commercial Banks and Financial
Institutions to raise finance from the market. The maturity period for CD's is between 7
days to 1 year. CD's is issued at a discount and repaid at face value. CD's is issued for a
minimum of 25 lakhs.
• Call Money Market: A loan which is taken or given for a very short period, that is for
one day is called Call Money Market. It involves lending and borrowing of money on a daily
basis. No security is required for these very short-term loans.
• Commercial Bill Market (CBM): This market deals with Bills of exchange. The drawer
of the bill can get the bills discounted with Commercial Banks. The Commercial Banks can
get the bills rediscounted with Financial Institutions.

20. Financial Market Instruments
• Money Market Instruments
• Capital Market Instruments

24. FS
Banking
Services
Foreign
Exchange
Services
Investment
Services
Insurance
Services

25. What is Risk & Return ?

26. Risk
• Risk is the chance that an investment's actual return will be different than
expected.
• Risk means you have the possibility of losing some, or even all, of your
original investment. Low levels of uncertainty (low risk) are associated with
low potential returns. High levels of uncertainty (high risk) are associated
with high potential returns. The risk/return tradeoff is the balance between
the desire for the lowest possible risk and the highest possible return

28. Returns
Returns are the gains or losses from a security in a particular period
and are usually quoted as a percentage. What kind of returns can
investors expect from the capital markets? A number of factors
influence returns.