Scribd Logo
Upload

Welcome to Scribd!

  • 30 views

    Hologram of Financial Management: An Integral View of Wealth Maximization

    Uploaded by

    Sahil Sharma
    The document discusses key differences between financial management and accounting, with financial management focusing on cash flows and decision making, and accounting focusing on collecting accrual-based data. The objectives of financial management are explained as wealth maximization rather than just profit maximization. Wealth maximization considers factors like share price, growth, and risk/return, whereas profit maximization is vague and ignores timing. Financial management decisions include funds requirement, financing, investment, and dividends, with the goal of maximizing shareholder wealth through an appropriate balance of return and risk.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd

    Hologram of Financial Management: An Integral View of Wealth Maximization

    Uploaded by

    Sahil Sharma
    30 views41 pages
    The document discusses key differences between financial management and accounting, with financial management focusing on cash flows and decision making, and accounting focusing on collecting accrual-based data. The objectives of financial management are explained as wealth maximization rather than just profit maximization. Wealth maximization considers factors like share price, growth, and risk/return, whereas profit maximization is vague and ignores timing. Financial management decisions include funds requirement, financing, investment, and dividends, with the goal of maximizing shareholder wealth through an appropriate balance of return and risk.

    Original Title

    1 Financial Management INTRO Final

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PPT, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses key differences between financial management and accounting, with financial management focusing on cash flows and decision making, and accounting focusing on collecting accrual-based data. The objectives of financial management are explained as wealth maximization rather than just profit maximization. Wealth maximization considers factors like share price, growth, and risk/return, whereas profit maximization is vague and ignores timing. Financial management decisions include funds requirement, financing, investment, and dividends, with the goal of maximizing shareholder wealth through an appropriate balance of return and risk.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    30 views41 pages

    Hologram of Financial Management: An Integral View of Wealth Maximization

    Uploaded by

    Sahil Sharma
    The document discusses key differences between financial management and accounting, with financial management focusing on cash flows and decision making, and accounting focusing on collecting accrual-based data. The objectives of financial management are explained as wealth maximization rather than just profit maximization. Wealth maximization considers factors like share price, growth, and risk/return, whereas profit maximization is vague and ignores timing. Financial management decisions include funds requirement, financing, investment, and dividends, with the goal of maximizing shareholder wealth through an appropriate balance of return and risk.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    You are on page 1of 41

    Hologram of

    Financial Management :
    An Integral View of Wealth
    Maximization
    Objectives of the
    Presentation
    • To drive home the differences between
    Financial management and Accounting.
    • To explain the objectives of financial
    management.
    • To point out the unifying concept of financial
    management i.e. wealth maximization.
    Finance and
    Accounting

    Finance Accounting

    Cash Flows Collection of Data


    Finance
    and
    Accounting

    Finance Accounting

    Accrual based
    Cash Flows
    Information
    USEFULNESS OF
    ACCOUNTING DATA
    FOR FINANCIAL
    MANAGER

    Profitability Solvency Liquidity


    Financial mgt Vs
    Accounting

    Finance Accounting

    Decision making Collection of Data


    Financial mgt:
    Areas of
    decision-
    making

    Financial
    analysis Financing
    Investment
    or Decision
    Dividend Decision
    decision
    Investment Decision

    Working capital
    Capital budgeting
    Management

    Management of
    Management of
    Current assets and
    Fixed Assets
    Current liabilities
    Capital budgeting
    Decisions

    Criterion
    Approval of Risk – for the
    Investment Return evaluation
    proposal Analysis of the worth of
    Benefits
    Working capital
    Magt. Decision

    Trade- off Efficient


    Between management
    Profitability and of individual
    Liquidity Current Assets
    Financing
    Decisions

    Capital
    structure

    Capital Capital
    structure structure
    Theory decision
    Dividend Policy
    Decisions

    Distribution of Retention of
    profits profits
    BALANCE SHEET

    Capital A/cs Asset A/cs


    Liability Expense
    A/cs A/cs
    Income A/cs
    BALANCE SHEET
    Sources of Uses of
    Funds Funds
    Capital A/cs Financial
    decision Asset A/cs Investment
    Liability
    a) Expense Decision
    A/cs
    Financial A/cs
    (capital exp)
    Income A/cs Analysis b) Expense Financial
    A/cs Analysis
    (loss)
    Goal of the
    Financial
    Manager

    Wealth
    Profit Maximization
    maximization
    Wealth maximization
    Vs
    Profit Maximization

    Meaning

    Wealth maximization Profit Maximization

    Increase in share
    Increase in Profits
    prices
    FINANCE
    MANAGER

    MAXIMIZATION
    OF SHARE VALUE

    FINANCIAL
    DECISION

    FUNDS REQUIRE
    MENT FINANCING INVESTMENT DIVIDEND
    DECISION DECISION DECISION DECISION

    RETURN RISK

    TRADE- OFF
    MEANING OF BUSINESS
    FINANCE
    • “ Business finance is that business
    activity which is concerned with the
    acquisition and conservation of
    capital funds in meeting financial
    needs and overall objectives of a
    business enterprise”
    OBJECTIVES OF FINANCIAL
    MANAGEMENT

    • Basic objectives
    • Other objectives
    BASIC
    OBJECTIVES

    Maintenance Profit Maximization


    of maximizatio of
    Liquid Assets n Wealth
    Profit maximization

    • It is Vague
    • It ignores Timing
    • It overlooks quality aspect of
    future activities
    BASIC OBJECTIVES

    Maximization
    of
    Wealth
    Steps in Maximization of
    Wealth
    • Avoid High Level of Risks
    • Pay Dividends
    • Maintain Growth in Sales
    • Maintain Price of Equity Shares
    • Social Responsibility
    • Government Constraints
    OTHER OBJECTIVES
    OTHER OBJECTIVES
    • Ensuring a fair return to share holders
    • Building up reserves for growth and
    expansion
    • Ensuring maximum operational
    efficiency efficient and effective
    utilization of finances
    • Ensuring financial discipline in the
    organization
    SCOPE OF FINANCIAL
    MANAGEMENT
    SCOPE OF FINANCIAL
    MANAGEMENT

    • Traditional Approach
    • Modern Approach
    Traditional Approach
    • Arrangement of funds from the
    financial institutions
    • Arrangement of funds from financial
    instruments, i.e., share, bonds, etc
    • Looking after the legal and
    accounting relationship between a
    corporation and its sources of funds.
    CRITICISMS

    • Outsider- looking-in approach


    • Ignored routine problems
    • Ignored non-corporate enterprise
    • Ignored working capital financing
    • No emphasis on allocation of funds
    MODERN APPROACH

    • Funds requirement
    decision
    • Financing Decision
    • Investment Decision
    • Dividend Decision
    LIQUDITY
    Vs
    PROFITABILITY
    Liquidity means that:
    • The firm has adequate cash to
    pay its bills
    • The firm has sufficient cash to
    make unexpected large
    purchases.
    • The firm has cash reserve to meet
    emergencies, at all time
    FINANCE
    MANAGER

    MAXIMIZATION
    OF SHARE VALUE

    FINANCIAL
    DECISION

    FUNDS REQUIRE
    MENT FINANCING INVESTMENT DIVIDEND
    DECISION DECISION DECISION DECISION

    RETURN RISK

    TRADE- OFF
    METHODS OF FINANCIAL
    MANAGEMENT

    • Measuring the Effectiveness of


    Firm’s Actions and Decisions
    • Measuring the Validity of the
    Decision Regarding Accepting or
    Rejecting Future Projects
    FINANCIAL TOOLS

    1.Cost of Capital
    2.Financial Leverage
    3.Capital Budgeting Appraisal Method
    4.ABC Analysis
    5.Ratio Analysis
    6.Fund Flow and Cash Flow Analysis
    RELATIONSHIP BETWEEN
    FINANCIAL MANAGEMENT
    AND OTHER AREAS OF
    MANAGEMENT
    Financial Management
    and
    Cost Accounting
    Financial Management
    and
    Marketing
    Financial Management
    and
    Assets Management
    Financial Management
    and
    Personnel Management
    Financial Management
    and
    Financial Accounting

    You might also like

    pFad - Phonifier reborn

    Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

    Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


    Alternative Proxies:

    Alternative Proxy

    pFad Proxy

    pFad v3 Proxy

    pFad v4 Proxy