Functions of Financial Management

University School of Business
Bachelor of Business Administration

FINANCIAL MANAGEMENT
Financial Planning DISCOVER . LEARN . EMPOWER

FINANCIAL PLANNING
Course Outcome
CO Title Level https://www.market-watch.in/index.php/2019/02/25/what-is
Numbe -financial-planning/
r
CO1 Have understanding of different areas of Financial planning Remember
CO2 Facilitate decision making in various field of financial planning Understand
CO3 Have an outlook of the planning for the finance by companies Understand
2
Importance of financial mgt
Economic growth and development
Improved standard of living
Allows better financial decision
Creates job
Alleviation of poverty
Promotes our environment
Functions of financial management
Investment decision
capital budgeting decision
Financing decision:
capital structure
Dividend decision:
distribute the profit
Liquidity decision:
manage the current assets properly.

Other functions:
Supervision of cash receipts and payments
Safeguarding of cash balances
Safeguarding of securities , insurance policies and other valuable papers
Taking care of mechanical details of new outside financing
Record keeping and reporting

1. Financial forecasting:-
It means to establish the long term and short term financial needs of the concern.
2. Estimating and controlling cash flows
Determination of financial objective, financial policies and operational procedures.
Designing the capital structure
i.e. determination of owns fund and borrowed fund
Determination of the proper sources of finance
i.e. it is like equity shares, preference share

6. Investment decision:
It means to determination of the amount of funds to be invested on fixed assets and on current assets.
7. Working capital management
i.e.cash management ,inventory management etc
8. Disposal of profit /dividend decision:
Decision making as to how much of profit of the concern should be get

Role of finance/financial manager
• Funds raising
• Funds allocation
• Profit planning
• Understanding capital markets
 Business forecasting
 Determination of financial objectives, financial polices and operational procedures
 Estimation of the capital requirements of the business

 Designing the capital structure
 Determination of the proper sources of finance
 Investment decision
 Ensuring supply of required funds
 Controlling the use of funds
 Profit planning
 Disposal of surplus or profit, or dividend decision
 Management of working capital
 Helping in valuation decisions

Time vale of money
• Meaning:
• The time value of money (TVM) is the idea that money available at the present time is worth more than the
same amount in the future due to its potential earning capacity.
• This core principle of finance holds that, provided money can earn interest, any amount of money is worth
more the sooner it is received.
• It can be used to compare investment alternatives and to solve problems involving loans, leases, savings.
• TVM help us in knowing the value of money invested.
• As time changes value of money invested on any project/ firm also changes.
Time value of money
• Present value (PV) - This is your current starting amount. It is the money
you have in your hand at the present time, your initial investment for your
future.
• Future value (FV) - This is your ending amount at a point in time in the
future. It should be worth more than the present value, provided it is
earning interest and growing over time.
• The number of periods (N) - This is the timeline for your investment (or
debts). It is usually measured in years, but it could be any scale of time
such as quarterly, monthly, or even daily.
• Interest rate (I) - This is the growth rate of your money over the lifetime of
the investment. It is stated in a percentage value, such as 8% or .08.
• Payment amount (PMT) - These are a series of equal, evenly-spaced cash
flows.
Ques. At the end of 3rd year what amount we will get or what will
be the future value of Rs.10,000 at rate of 4.5% uniformly.
Solution;
As we know PV=𝐹𝑉/(1+𝑖)𝑛 𝐹𝑉 = 𝑃𝑉(1 + 𝑖)𝑛
where, PV= Rs.10,000 , i= 4.5% and n= 3 years
Therefore,
FV= 10,000 (1 + 0.045)3
= 10,000 (1.045)3 = 10,000 (1.14116612)
= Rs.11411.66 ( at the end of the 3rd year)
Reason for Time value of Money
Risk and Uncertainty:
No certainty for future cash inflows.
2. Inflation:
A rupee today represents a greater real purchasing power than a rupee in future
3.Consumption:
Individuals generally prefer current consumption to future consumption.
4.Investment opportunities
An investor can profitably use the received money today to get higher return tomorrow or after a certain period of time.
Importance
In Investment Decisions - Small businesses often have limited resources to invest in business operations, activities and
expansion. One of the factors we have to look at is how to invest, is the time value of money.
In Capital Budgeting Decisions - When a business chooses to invest money in a project - such as an expansion, a strategic
acquisition or just the purchase of a new piece of equipment -- it may be years before that project begins producing a
positive cash flow. The business needs to know whether those future cash flows are worth the upfront investment.
ASSESSMENT
PATTERN
18
APPLICATIONS
• To know the Approaches of financial management

• To know about Scope of Finance
19
REFERENCES
http://qu.edu.iq/ade/wp-content/uploads/2016/02/financial_management_www.accfile.com_.pdf
Maheshwari S.N. “Principles of Financial Management”, Sultan Chand & Sons, New Delhi
Kulkarni P.V. “Financial Management”, Himalaya Publishing House, Mumbai
.
THANK YOU
For queries
Email: subject_code_2019@gmail.com

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University School of Business

Bachelor of Business Administration

Financial Planning DISCOVER . LEARN . EMPOWER

CO1 Have understanding of different areas of Financial planning Remember

CO2 Facilitate decision making in various field of financial planning Understand

capital budgeting decision

distribute the profit

manage the current assets properly.

Supervision of cash receipts and payments

Safeguarding of cash balances

Safeguarding of securities , insurance policies and other valuable papers

Taking care of mechanical details of new outside financing

Record keeping and reporting

2. Estimating and controlling cash flows

Determination of financial objective, financial policies and operational procedures.

Designing the capital structure

i.e. determination of owns fund and borrowed fund

Determination of the proper sources of finance

i.e. it is like equity shares, preference share

7. Working capital management

i.e.cash management ,inventory management etc

8. Disposal of profit /dividend decision:

Decision making as to how much of profit of the concern should be get

 Determination of financial objectives, financial polices and operational procedures

 Estimation of the capital requirements of the business

 Determination of the proper sources of finance

 Ensuring supply of required funds

 Controlling the use of funds

 Disposal of surplus or profit, or dividend decision

 Management of working capital

 Helping in valuation decisions

• TVM help us in knowing the value of money invested.

• To know the Approaches of financial management

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