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8/6/2019 Assingment Finance
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AA
INTRODUCTION OFINTRODUCTION OF
FINANCIALFINANCIAL
MANAGEMENTMANAGEMENT
BYBY
SAVNESH UPADHYAYSAVNESH UPADHYAY
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What is financial management?Financial management is about planning income andexpenditure, and making decisions that will enable
you to survive financially.
Financial management includesfinancial planning and budgeting,
financial accounting
financial analysis,
financial decision-making and action
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What is the objective of financialmanagement?
Profit Maximization:
The objective of financial management is the
same as the objective of a company which is toearn profit. But profit maximization alone cannot
be the sole objective of a company. It is a limitedobjective. If profits are given undue importancethen problems may arise as discussed below.
The term profit is vague and it involves much
more contradictions. Profit maximization must beattempted with a realization of risks involved. Apositive relationship exists between risk andprofits. So both risk and profit objectives shouldbe balanced.
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What is the objective of financialmanagement?
Wealth MaximizationWealth Maximization
The value of a firm is represented by the market price of thecompany's stock. The market price of a firm's stock represents
the assessment of all market participants as to what the value ofthe particular firm is.
Return MaximizationReturn Maximization
The second goal of f inancial management is to safeguard theeconomic interest of the persons who are directly or indirectly
connected with the company, i.e.,shareholders, creditors andemployees. The all such interested parties must get themaximum return for their contributions. But this is possible onlywhen the company earns higher profits or sufficient profits todischarge its obligations to them. Therefore, the goal ofmaximization of returns are inter-related.
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What is the objective of financialmanagement?
To plan a sound capital :To plan a sound capital :
There should be sound and fair composition of
capital so that a balance is maintained between debtand equity capital
To ensure safety on investmentTo ensure safety on investment
Funds should be invested in safe ventures so thatadequate rate of return can be achieved
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What is the objective of financialmanagement?
Wealth MaximizationWealth Maximization
The value of a firm is represented by the market price of thecompany's stock. The market price of a firm's stock represents
the assessment of all market participants as to what the value ofthe particular firm is.
Return MaximizationReturn Maximization
The second goal of f inancial management is to safeguard theeconomic interest of the persons who are directly or indirectly
connected with the company, i.e.,shareholders, creditors andemployees. The all such interested parties must get themaximum return for their contributions. But this is possible onlywhen the company earns higher profits or sufficient profits todischarge its obligations to them. Therefore, the goal ofmaximization of returns are inter-related.