Professional Documents
Culture Documents
MEANING:-
Financial management is concerned with efficient acquisition and allocation
of funds. In operational terms, it is concerned with management of flow of
funds and involves decisions relating to procurement of funds.
FINANCE FUNCTION:-
(1)Investment decision
(2)Financing decision
(3)Dividend decision
FINANCIAL PLANNING
MEANING:-
Financial planning means deciding in advance how much to spend and on
what on to spend according to the fund at your disposal.
IMPORTANCE:-
(1)Helps management avoid waste resulting from complexity of operations
(2)Provides policies and procedures which helps closer cooperation between
various function of business
(3)Aids company in preparation for future
(4)Tends to relieve top management from detailed time consuming process
(5)Avoids confusion and waste such as loss of time, goodwill & financial
matters
(6)The success or failure of production and distribution function depend on it
CAPITAL STRUCTURE
MEANING:-
The capital structure means the proportion of debt and equity used for
financing the operations of a business. The right proportion of debt and equity
is desired to maximize the use of funds.
FEATURES OF APPROPRIATE CAPITAL STRUCTURE:-
(1)Return
(2)Risk
(3)Flexibility
(4)Capacity
CAPITALIZATION
1] OVER CAPITALIZATION:-
(c)On Society:
(i)The company may resort to tactics like increase the price, reduce quality
of
products etc.
(ii)Expenditure on wages is curtailed which leads to labour unrest & strikes
(iii)Creditors affected due to irregular payment of interest
(iv)Such firms are drain on the resources of the society as they don’t earn
adequate returns.
2] UNDER CAPITALIZATION:-
WORKING CAPITAL
Two concepts of working capital:-
(1)Gross working capital
(2)Net working capital