FINANCIAL MANAGEMENT:

AN OVERVIEW

Forms of Business Organizations

Sole proprietorship
Partnership
Limited Liability Partnership
Co operative society
Company

Private
Public
Not for profit

Limited Liability Partnership

The Limited Liability Partnership Act 2008 notified on 31st March
2009.

For taxation, an LLP is like any partnership firm.

Partners are limited to their agreed contribution in the LLP.
No partner liable on account of independent or unauthorized actions of
other partners
LLP is a body corporate and a legal entity separate from its partners.

It has perpetual succession.

Indian Partnership Act, 1932 not applicable
No upper limit on number of partners in an LLP
One of the partner to the LLP should be an Indian.

Corporate actions like mergers, amalgamations. Enabling provisions of

winding up and dissolutions of LLPs.
Conversion of existing partnership firm, private limited company and
unlisted public company into LLP through registering with the Registrar of
Companies (ROC)
The Registrar of Companies (Roc) registers and controls LLPs also.

Need for Financial Decisions

Capital Structure
Capital Budgeting
Working Capital

Goal of Financial Management

Value maximisation
Profit maximisation
Maximisation of EPS
Maximisation of share price

Risk Return Tradeof

Return
Risk
Tradeof
Market forces and firm value

Agency Problem

Managers as agents to create value

Shareholders as beneficiaries of value
creation
Clash of Interest -Agency problem
Solution

Control measures
ESOP

Finance Function

Treasurer

Raising finance
Cash management
Credit administration
Capital budgeting
Bank dealings

Controller

Financial accounting
Internal audit
Taxation
Management accounting
Financial control

Key challenges for finance manager

Investment planning
Financial structure
Merger, acquisition, restructuring
Working Capital management
Risk management
Investor relations
Firm performance management
Corporate governance
Compliance with regulations and legal system