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SUBMITTED TO: SUBMITTED BY:

MBA II Semester
Section î


 

x Students will be able to understand what financial management is.

x Students will be able to identify different sources of finance.

x Students will be able to listen.

x Some students will be able to apply the information and produce an

independent information pack.

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x It is concerned with the efficient use of an important

economic resources, namely capital funds.

x It is concerned with the managerial decisions that results

in the acquisition and financing of short term and long
term credits of the firm.

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x Ñart of overall management.

x Closely related with other disciplines.
x Continuous process
x Different from accounting
x Fast growing
x Helpful in decision making
x Wider scope

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Financial management is concerned with optimization of output from

the given input of funds.

x Traditional Approach- arrangement of funds.

x Modern Approach-effective utilization of funds

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x Investment decision or long term asset mix decision.

x Finance decision or capital mix decision

x Dividend decision or profit allocation decision

x Liquidity decision or short term asset mix decision

 
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x 

 ü growth
generated through the
development and expansion of
the business itself. Can be
achieved through:
x 




 ü
increasing revenue to impact on
overall profit levels
x u


ü used to
reinvest in the business
x 
 ü can be a double
edged sword ü reduces









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x Long Term ü may be paid

back after many years or not
at all!
x Short Term ü used to cover
fluctuations in cash flow
x µInorganic Growth¶ ü growth
generated by acquisition



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x Loans (Represent creditors to the company ü not owners)
x O


 
 ü suitable for small to medium sized firms
where property or some other asset acts as security for the loan
x 





O
 ü act on behalf of clients to organise
and underwrite raising finance
x 


!@u ü may offer loans in certain circumstances
x Grants

x Shares (Shareholders are part owners of a company only in

ÑLC¶s)
x º ü arranged by investment banks.

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 ü necessity of paying interest on the payment,
repayment periods from 1 year upwards but generally no longer
than 5 or 10 years at most

x 
 
 ü the right to be able to withdraw funds you
do not currently have
x Ñrovides flexibility for a firm

x Interest only paid on the amount overdrawn

x Overdraft limit ü the maximum amount allowed to be drawn -

the firm does not have to use all of this limit

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x "
ü Careful management of trade credit can help ease
cash flow ü usually between 28 and 90 days to pay

x |

 ü the sale of debt to a specialist firm who secures
payment and charges a commission for the service.

x 
ü provides the opportunity to secure the use of capital

without ownership ü effectively a hire agreement

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x $ 


x The necessity of financing
external inorganic growth
x %

x firms agree to join

together ü both may
retain some form of
identity
x " %

x One firm secures control

of the other, the firm
taken over may lose its
identity 
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x Individuals looking for investment opportunities

x Generally small sums up to £100,000

x Could be an individual or a small group

x Generally have some say in the running of the company

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x Ñooling of capital in the form of limited companies ü enture

Capital Companies

x Looking for investment opportunities in fast growing businesses

or businesses with highly rated prospects

x May also buy out firms in administration who are going concerns

x May also provide advice, contacts and experience

x In the UK, venture capitalists have invested £50 billion since

1983

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