LEARNING OBJECTIVES
2
Important Business
Activities
Production
Marketing
Finance
Financial
Equity Shares
Preference Shares
Loans,
Preference
Finance and
Management Functions
All
Finance Functions
8
Financial Procedures
and Systems
Raising
of Funds
Allocation of Funds
Profit Planning
Understanding Capital Markets
Financial Goals
11
Profit
Profit Maximization
12
Maximizing
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Objections to Profit
Maximization
It is Vague
It Ignores the Timing of Returns
It Ignores Risk
Assumes Perfect Competition
In new business environment profit maximization
is regarded as
Unrealistic
Difficult
Inappropriate
Immoral
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15
Shareholders Wealth
Maximization
Maximizes
16
Risk-return Trade-of
17
Risk and expected return move in tandem; the greater the risk, the greater
the expected return.
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Overview of Financial
Management
Agency Problems:
20
Managers
Versus Shareholders Goals
There
In
In
21
Agency Problems:
Managers Versus
Agency Costs
22
Agency
23
24
The
shareholders wealth maximization is the secondlevel criterion ensuring that the decision meets the
minimum standard of the economic performance.
In the final decision-making, the judgement of
management plays the crucial role.
The wealth maximization criterion would simply
indicate whether an action is economically viable or
not.
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26
Organisation of Finance
Function
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