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OVERVIEW
INTRODUCTION
Finance and its functions are concerned with the planning and controlling of the firms financial resources.
AREAS OF FINANCE
Financial Services
Advice and financial products to individuals, businesses and governments within the areas of banking and related institutions. Personal financial planning, investments, real estate, insurance etc.
In assessing the past performances and future directions of the firm In meeting legal obligations, such as payment of taxes etc. Sometimes, financial management and accounting are often not easily distinguishable.
Treatment of funds
Decision Making
The purpose of accounting is collection and presentation of financial data. It provides consistently developed and easily interpreted data on the past, present and future operations of the firm. The financial manager uses such data for financial decision making. But the primary focus of the functions of accountants is on collection and presentation of data while the financial managers major responsibility relates to financial planning, controlling and decision making. Thus finance begins where accounting ends.
Treasures
Controller
Capital Expenditure Manager Financial Planning and fundraising manager Cash Manager Credit Manager Foreign Exchange Manager Pension Fund Manager
Tax Manager Cost Accounting Manager Corporate Accounting Manager Financial Accounting Manager
Dividend Decision
Liquidity Decision
INVESTMENT DECISION
(CAPITAL BUDGETING/LONG TERM ASSET MIX DECISION)
Questions to Address What is the optimal firm size? Measured by total rupee value of all assets
What specific assets should be acquired? What should be the amount invested in each of the assets selected?
Asset Selection
Asset Mix
What assets (if any) should be reduced or eliminated? What should be the minimum return, an asset should give? What is the risk (variability in returns) associated with an investment?
FINANCING DECISION
(LONG TERM CAPITAL MIX DECISION/ CAPITAL MIX DECISION )
Questions to Address What specific kind of securities to be issued? What should be the amount raised by issuing each of the securities? What is the cost associated with each component of the capital? Capital Component Structure
Capital Mix
Cost of Capital
What securities (if any) should be retired? What is the overall cost of capital?
DIVIDEND DECISION
(PROFIT DISTRIBUTION DECISION)
Questions to Address What are the earnings available for distribution as dividends?
What are the alternative financing sources other than the current and retained earnings?
LIQUIDITY DECISION
(WORKING CAPITAL DECISION)
The above mentioned are not frequent decisions. Manager is responsible for the day-to-day activities such as . There is a need to manage liquidity to meet the various current liabilities (Creditors, Bank OD, B/R etc.)