Financial Management

N. Karunambikai
Faculty Member - Dept. of Management Studies
Oxford College of Engineering, Bangalore
 Index

Introduction
Finance & Economics
Finance & Accounting
Related disciplines
Scope of FM
 Introduction

Examine the relationship between finance, economics and

accounting
Provide an overview of the scope of financial management
in terms of the important decision making areas relating to
the financial operations of an organization
Discuss the objectives of financial management
Outline the main functions of financial managers in a
typical organization
Summarize
 Introduction

Examine the relationship between finance, economics and

accounting
Provide an overview of the scope of financial management
in terms of the important decision making areas relating to
the financial operations of an organization
Discuss the objectives of financial management
Outline the main functions of financial managers in a
typical organization
Summarize
 Finance & Economics
• Financial management is an integral part of overall management.
• Finance, economics, accounting, marketing, production and
quantitative methods are interrelated but with some key differences.

– Macro economics
• Industry
• Recognize and understand cost and availability of funds
• Be versed with fiscal policy and its effects of economy
• Be aware of various financial institutions and outlets
• Understand the level of economic activities

– Micro economics
• Firm
• Supply and demand
• Issues related to mix of productive factors
• Measurement of risk factors
• Marginal analysis
– Marginal revenue and Marginal cost
 Finance & Accounting
• Finance and accounting are closely related
– Accounting is an input for finance functions
– Accounting generates information/data relating to the activities of the firm

INPUT PROCESS OUTPUT

From different Accounting function Balance sheet
departments of an
FFS / CFS
organisation

• Output helps the Finance manager in understand the past, current

performance of the firm and make decisions for future performance.
 Finance & Marketing
• Finance management should consider the impact of

– Promotion plans in the market area

– Capital outlay requirement and

– Projected cash flow for promotional expenditure

 Finance & Production
• Finance management should consider the impact of

– New product developments

– Production process change related capital expenditures

 Other related disciplines

Primary
1. Investment analysis • Accounting
Support
2. Working capital management • Macro economics
3. Sources and cost of funds • Micro economics
4. Determination of capital structure
Secondary
5. Dividend policy Support
• Marketing
6. Analysis of risks and returns
• Production
• Quantitative methods
Result

Share holder wealth maximization