Treasury & Fund

Management
Specialization Course
COURSE INSTRUCTOR:
AHMED JAMALI
BS Commerce (S.U)
MBA (MUET)
PHD (MUET)
Pre-Requisite
(Basics)
COURSE INSTRUCTOR:
AHMED JAMALI
BS Commerce (S.U)
MBA (MUET)
PHD (MUET)
 Pre-Requisite (Basics)

Financial Accounting:
Understanding financial statements, accounting
principles, and financial reporting is crucial in Treasury
and Fund Management.
Students should be familiar with concepts such as
balance sheets, income statements, and cash flow
statements.

Financial accounting is the process of recording, summarizing, and reporting an 4

organization's financial transactions to external stakeholders.
 Pre-Requisite (Basics)

Managerial Finance:
A foundational knowledge of managerial finance,
including topics like time value of money, risk and
return, and financial analysis, is often essential.
This provides a solid basis for understanding the
financial decisions involved in treasury and fund
management.

Managerial finance is the management and analysis of a company's internal financial decisions, 5
including budgeting, forecasting, and investment strategies, to maximize shareholder value.
 Pre-Requisite (Basics)

Economics:
A basic understanding of economic principles,
particularly macroeconomics and microeconomics, can
be valuable.
Economic factors often play a significant role in
financial markets and investment decisions.

Economics studies how individuals and societies allocate resources to fulfill their needs 6
and wants, examining production, distribution, and consumption of goods and services.
 Pre-Requisite (Basics)

Statistics and Quantitative Skills:

Treasury and Fund Management involve analyzing
financial data and making decisions based on
quantitative analysis.
Proficiency in statistics and quantitative methods is
beneficial.

Statistics and quantitative skills involve using mathematical methods to analyze and 7
interpret data, supporting decision-making in various fields.
 Pre-Requisite (Basics)

Financial Markets and Institutions:

Familiarity with financial markets, various financial
instruments (such as bonds, stocks, derivatives), and
their functioning is important.
This knowledge helps in understanding how funds are
managed and invested.

Financial markets and institutions are structures facilitating the exchange of funds between savers and borrowers. Markets involve 8
buying/selling financial instruments, while institutions, like banks, intermediaries, manage the process and provide financial services.
 Pre-Requisite (Basics)

Risk Management:
Treasury functions often involve managing risks.
An understanding of risk management
principles, including identifying, assessing, and
mitigating risks, is valuable.

Risk management is the process of identifying, assessing, and mitigating potential risks to 9

achieve organizational objectives.

 Pre-Requisite (Basics)

Business Ethics and Legal Considerations:

An awareness of ethical considerations in finance and
an understanding of relevant legal frameworks is
important.
This includes compliance with regulations related to
fund management.

Business ethics involves applying moral principles to business decisions, considering stakeholders. 10
Legal considerations involve compliance with applicable laws and regulations in business operations.
 Pre-Requisite (Basics)

Corporate Finance:
Knowledge of corporate finance principles,
including capital structure, dividend policy, and
financial planning, provides a foundation for
understanding broader financial management
concepts.

Corporate finance manages an organization's financial activities to maximize 11

shareholder value through decisions on funding, investment, and capital structure.
 Pre-Requisite (Basics)

Investment Principles:
Understanding investment theories,
portfolio management, and asset allocation
is crucial for individuals involved in fund
management.

Investment principles involve strategies like risk-return analysis, diversification, and asset 12
allocation to optimize returns while managing risk based on financial goals and preferences.
 Pre-Requisite (Basics)

Financial Management:
Treasury management is a subset of financial management.
It involves the handling of an organization's cash,
investments, and financial instruments to optimize liquidity
and ensure financial stability.
This knowledge helps in understanding treasury and fund
management subject.

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 Pre-Requisite (Basics)

Financial Management:
Financial Management means planning, organizing,
directing and controlling the financial activities of the
organization.
It refers the efficient and effective management of
money (funds) in such a manner as to achieve the goals
of the organization.

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 Pre-Requisite (Basics)

Ten Principles of Financial Management

“It is necessary to understand these
principles in order to understand finance.”

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 Pre-Requisite (Basics)

Principle 1: The Risk-Return Trade-off

We won’t take on additional risk unless we expect to
be compensated with additional return.
Investment choices have different amounts of risk and
expected returns.
The more risk an investment has, the higher its
expected return will be.
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 Pre-Requisite (Basics)

Principle 2: The Time Value of Money

A Rupee received today is worth more than a
Rupee received in the future.
Because we can earn interest on money received
today, it is better to receive money earlier rather
than later.

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 Pre-Requisite (Basics)

Principle 3: Cash—Not Profits—Is King

Cash Flow, not accounting profit, is used as our
measurement tool.
Cash flows, not profits, are actually can be
reinvested.

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 Pre-Requisite (Basics)

Principle 4: Incremental Cash Flows

The incremental cash flow is the difference
between the projected cash flows if the
project is selected, versus what they will be,
if the project is not selected.

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 Pre-Requisite (Basics)

Principle 5: The Curse of Competitive Markets

It is hard to find exceptionally profitable projects.
If an industry is generating large profits, new entrants are
usually attracted. The additional competition and added capacity
can result in profits being driven down to the required rate of
return.
Product Differentiation, Service and Quality can separate
products from competition.

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 Pre-Requisite (Basics)

Principle 6: Efficient Capital Markets

The markets are quick and the prices are
right.
The values of all assets and securities at
any instant in time fully reflect all available
information.
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 Pre-Requisite (Basics)

Principle 7: The Agency Problem

Managers won’t work for the owners unless it is in their best
interest.
A agency problem resulting from conflicts of interest between
the manager/agent and the stockholder/owners.
Managers may make decisions that are not in line with the goal
of maximization of shareholder wealth.

22
 Pre-Requisite (Basics)

Principle 8: Taxes Bias Business Decisions

The cash flows we consider are the after-tax
incremental cash flows to the firm as a whole.

23
 Pre-Requisite (Basics)

Principle 9: All Risk is Not Equal

Some risk can be diversified away, and some
cannot.
The process of diversification can reduce risk,
and as a result, measuring a project’s or an asset’s
risk is very difficult.

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 Pre-Requisite (Basics)

Principle 10: Ethical Behavior is Doing the

Right Thing, and Ethical Dilemmas Are
Everywhere in Finance
Each person has his or her own set of values,
which forms the basis for personal judgments
about what is the right thing.

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 Pre-Requisite (Basics)

Decisions of Financial Manager

Investment Decisions
How, when, where and how much money will be spent on investment
opportunities.
A firm has many options to invest their funds but firm has to select the
most appropriate assets for investment which will bring maximum benefit
for the firm.
What specific assets should be acquired?
What assets (if any) should be reduced or eliminated?

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 Pre-Requisite (Basics)

Decisions of Financial Manager

Financing Decisions
Determine how the assets will be financed.
A company can raise finance from various sources such as by issue
of shares, debentures or by taking loan and advances. These sources
of finance can be divided into two categories: owners fund (no risk
involve) and borrowers fund (risk involve).
Find the least expensive sources of fund.

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 Pre-Requisite (Basics)

Decisions of Financial Manager

Asset Management Decisions
How do we manage existing assets efficiently?
Financial Manager has varying degrees of operating
responsibility over assets.
Greater emphasis on current asset management than fixed asset
management.

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 Pre-Requisite (Basics)

What are the Goals of the Firm? (General Goals)

Survival
Avoid financial distress and bankruptcy
Beat the competition
Maximize sales or market share
Minimize costs
Maximize profits
Maintain steady earnings growth.

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 Pre-Requisite (Basics)

The Real Goal of the Firm

Maximization of Shareholder Wealth!
Shareholders’ wealth can be measured as
the current value per share of existing
shares.
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 Pre-Requisite (Basics)

Organization of the Financial Management Function

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 Pre-Requisite (Basics)

Organization of the Financial Management Function

Vice President of Finance
Treasurer Controller
Cost Accounting
Capital Budgeting
Cost Management
Cash Management
Data Processing
Credit Management General Ledger
Dividend Disbursement Government Reporting
Financial Analysis/Planning Internal Control
Pension Management Preparing Fin Statements
Insurance/Risk Management Preparing Budgets
Tax Analysis/Planning Preparing Forecasts

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Thank You.