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INTRODUCTION TO FINANCE

Financial management refers to the management of finance it is the effective

& efficient utilization of financial resources. It means creating a balance among

financial planning, procurement of funds, profit administration and sources of

funds. The Financial management is defined as follows:

According to SOLOMAN, Financial management is concerned with the

efficient use of an important economic resources, namely, capital funds.

According to HOWARD AND UPTON, Financial management

is the application of the planning and control functions of the finance

functions.

OBJECTIVES OF FINANCIAL MANAGEMENT

The main objective of a business is to maximize the owners

economic welfare. There are two types i.e,

1. Profit maximization.

2. Wealth maximization.

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IMPORTANCE OF FINANCIAL MANAGEMENT

Financial management is indeed, the key to successful

business operations. With out proper administration and effective utilization of

finance , no business enterprise can utilize its potentials for growth and

expansion.

Financial management is concerned with the acquisition,

financing and management of assets with some overall goals in mind. As

mentioned in the contents of modern approach, the discussions on Financial

management can be divided into three major decisions viz.,

1. Investment decision

2. Financing decision and

3. Dividend decision

Financial decisions

Investment

decision

Financing

decision

Dividend

decision

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A firm takes these decisions simultaneously and continuously in the normal

course of its business.

1 .INVESTMENT DECISION:

The investment decision relates to the selection of assets in which funds

will be invested by a firm. Theassets which can be acquired fall into two

broad groups.

.long term assets which will yield a return over a period oftime in future.

short term or current assets defined as those assets which inthe normaly course of business are convertible into cash usually

with in a year.

2. FINANCING DECISION:

The second major decision involved in financial management is the

financing decision. The investment decision is broadly concerned with the asset

mix or the composition of the assets of a firm. The concern of the financing

decision is with the financing mix or capital structure or leverage. The term

capital structure refers to the proportion of debt and equity capital.

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3.DIVIDEND DECISION:

The third major decision of financial management is the decision relating tothe dividend policy. The dividend decision relating to the dividend policy. The

dividend decision should be analyzed in relation to the financing decision of a

firm. Two alternatives are available in dealing with the profits of a firm they

can be distributed to the share holders in the firm of dividends or they can

be retained in the business which course should be followed dividend or

retention.

RATIO ANALYSIS

Ratio analysis is the process of determining and interpreting numerical

relationships based on financial statements. By computing ratios, it is easy to

understand the financial position of the firm.

Ratio analysis is used to focus on financial issues such as liquidity,

profitability and solvency of a given firm.

WHAT IS A RATIO?

Ratio is simply a number expressed in terms of another. It refers to the

numerical or quantitative relationship between two variables which are

comparable. This relationship can be exposed as

Percentages Fractions Proportion of numbers

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It is an expression derived by dividing one variable by the other It is a

statistical measure that provides an insight into the relationships between

two variables. Ratios used rightly may even develop understanding and stimulate

thinking . ratios can be expressed in terms of percentages, Proportions ,

quotients also .

TYPES OF RATIOS:

Based on their nature, the ratios can broadly be classified into four categories:

Types

of ratios

Liquidity ratio

Activity ratio

Profitability ratio

Solvency (or) leverage ratio

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NEED FOR THE STUDY

A ratio can be conceptualized based on the need. There are significant variations

in the ratios used in different firms of the same industry.

The need to study ratio analysis is to analyze the financial performance ofLANCO. This gives an insight into the firms past as well as the current

financial and operational performance. Ratio analysis is not an end itself. It is

one the method for better understanding of financial strengths and weakness

of a firm.

Comparison of the calculated ratios with the standard ratios. It is possible to

know the financial performance. So it is necessary to study the ratio analysis

of LANCO POWER pvt Ltd.

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Scope of the study

The study is based on the quantitative data provided bycompany and study was carried for a period of 6 weeks.

The study is done with the help of finance department of thecompany.

The study is focused on current financial position of thecompany.

The study is completely confined to GENTING LANCO PVTLTD.

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OBJECTIVES OF THE STUDY

1. To know the profile of the GENTING LANCO PVT Ltd.

2. To study the financial policies followed by the GENTING LANCO .

3. To assess the financial performance of GENTING LANCO by analyzing

various ratio.

4. To examine the trends of GENTING LANCO recgading of financial

performance.

5. To find out the constraints and to offer suggisions for improving the

performance.

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METHODOLOGY

The total data required for the study has been collected by using theprimary data and secondary data and collection was made in the following

manner.

The Primary Data has been collected with the help of officials of

the organization and collected data regarding the hierarchy, structure, policies,

vision, mission proceduresetc

The study is largely based on secondary data collected in the

following way

company annual reports. company journals. magazines. web sites and annual reports, etc.., published by the organization.

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LIMITATIONS

1. The present study is intended to cover a period of 5 years from 2007

to 2012 for examining financial performance.

2. The analysis depends upon the data (numerical, quantitative) provide by

the GENTING LANCO PVT LTD.

3. The performance of the company (LANCO) is assessed by using

liquidity ratio, activity ratio, profitability ratio and capital structure ratio.

4. The ratios are computed based on the past data (or) previous

performance. They may not necessarily hold good in the future and may not

be helpful in making projections into future

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