FINANCIAL MANAGEMENT NATURE AND SCOPE - AN INTRODUCTION

1. WINTERTemplateNATURE & SCOPE OF
FINANCIAL MANAGEMENT
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MODULE 1
Submitted by,
ABDUL MANAF
AMAL P
ROOPESH V NAMBOODIRI
PRIYESH P
VISHNU K KUMAR
SATHEESH KUMAR S
STEJI JOHNY
SAJANA P.A
SARI V.S
ROSE MARY V.A

2. 02
BUSINESS FINANCE
Business activity which is concerned with the acquisition and
conservation of capital funds in meeting the financial needs and
overall objectives of business enterprise.
- B.O Wheeler
Activity concerned with the planning, raising, controlling and
administering the funds used in the business.
- Guthumann & Dougall

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Financial Management
The area of business management devoted to a judicious use of
capital and a careful selection of sources of capital in order to
enable a spending unit to move in the direction of reaching its
goals.
- J.F. Bradely
Operational activity of a business that is responsible for obtaining
and affectively utilising the funds necessary for efficient operations.
- J.L Massie

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Importance of Financial Management
• Financial planning & successful promotion of enterprise
• Acquisition of funds as & when required at minimum
possible cost.
• Proper use and allocation of funds.
• Taking sound financial decisions.
• Improving the profitability through financial controls.
• Increasing the wealth of investors & the nation.
• Promoting & mobilising individual and corporate savings.

5. 05
Finance Function
The Process of acquiring and utilizing funds of a business.
- R.C Osborn
Financing consists of raising, providing, managing of all the
money, capital or funds of any kind to be used in connection with
the business.
- Bonneville & Dewey

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Aims of Finance Function
1. Acquiring Sufficient funds
2. Proper Utilisation of funds
3. Increasing profitability
4. Maximising firms value

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SCOPE OF FINANCE FUNCTION
1. Estimating financial requirements
2. Deciding capital structure
3. Selecting a source of finance
4. Selecting a pattern of investment
5. Proper cash management
6. Implementing financial controls
7. Proper use of surpluses

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Objectives of financial management
1.Profit Maximisation
Profit is the main aim of every economic activity.
Arguments in favour of profit maximisation as the objective of
business:-
 When profit earning is the aim of business then profit maximisation
should be the objective.
• Profitability is a barometer for measuring efficiency and economic
property of a business enterprise.
• Economic and business conditions do not remain same at all the
times.
• Profits are the main source of finance for the growth of the
business.
• Profitability is essential for fulfilling social goals also.

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• Economic and business conditions do not remain same at
all the times.
• Profits are the main source of finance for the growth of the
business.
• Profitability is essential for fulfilling social goals also.
2.Wealth Maximisation
Financial theory asserts that wealth maximisation is
the single substitute for a stockholder’s utility. When the
firm maximises the stockholder’s wealth, the individual
stockholder can use this wealth to maximise his individual
utility.

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FINANCIAL DECISIONS
1.Investment decisions
investment decision related to the discrimination of total
amount of assets to be held in the firm, the composition of these
assets and the business risk complexions of the firm as perceived
by its investors.
2.Financing decisions
Once the firm has taken the investment decision and
committed it self as new investment, it must decide the best means
of financing these commitments. A financial manager has to select
such source of funds which will make optimum capital structure.

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3.Divident decisions
The third major financial decision relates to the
disbursement of profits back to investors who supplied capital
to the firm. Dividend is the reward of shareholder for
investments made by them in the share capital of the
company.

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Functions of finance manager
• Financial forecasting and planning
• Acquisition of funds
• Investment of funds
• Helping in valuation decision
• Maintain proper liquidity