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,FIN2603 Exam Pack 2026:
Comprehensive Notes, Past Papers
& Solutions for Financial
Management for Non-Financial
Managers (UNISA) – Achieve High
Marks!
FIN2603: Financial Management for Non-Financial Managers
Module 1: Introduction to Managerial Finance
---
1.1 What is Financial Management?
Financial management refers to the art and science of
managing money within an organisation. It encompasses the
planning, organising, directing, and controlling of financial
activities such as procurement and utilisation of funds.
1.2 The Primary Goal of the Firm
- Objective: Maximise Shareholder Wealth
- Measurement: This is measured by the Market Price per
Share, NOT by Earnings Per Share (EPS) or simple Profit
Maximisation.
- Key Distinction: While profit maximisation focuses on short-
term gains, wealth maximisation considers long-term value,
risk, and timing of returns.
1.3 The Agency Relationship & Problem
- Agency Relationship: The contractual relationship between
the Principals (Shareholders) and the Agents (Management) .
Shareholders employ managers to run the company on their
behalf with the expectation that share value will increase.
- Agency Problem: A conflict of interest arises when
management pursues personal goals (e.g., lavish perks, empire
building, job security) at the expense of shareholder wealth.
,- Agency Costs: Costs incurred by shareholders to align
management's interests with their own. These include:
- Monitoring Costs: External audits and internal controls to
prevent abuse of funds.
- Bonding Costs: Contractual limitations on management
decisions.
- Incentive Compensation: Bonus shares, performance
bonuses, and stock options designed to motivate managers to
increase share price.
1.4 Social Corporate Responsibility (CSR) & Governance
- Corporate Social Responsibility (CSR): Voluntary investment in
socially beneficial projects (e.g., sustainability, community
outreach). While not directly profit-driven, effective CSR
enhances corporate image and brand loyalty, leading to
increased shareholder wealth in the long term.
- Corporate Governance: The framework of rules, policies, and
ethical standards by which a company is directed and
controlled. It ensures accountability, fairness, and transparency
in a firm's relationship with all its stakeholders.
---
Page 3
Module 1 (Continued): Functions, Markets & Business
Structures
---
1.5 Core Functions of the Financial Manager
The Financial Manager acts as the gatekeeper of the
organisation's capital. Key responsibilities include:
- Capital Acquisition: Raising funds through debt or equity
markets.
- Investment Decisions (Capital Budgeting): Evaluating and
selecting long-term projects that add value to the firm.
, - Working Capital Management: Managing short-term assets
(inventory, cash) and liabilities to ensure operational liquidity.
- Treasury & Oversight: Managing cash flow, foreign exchange
risk, and supervising the accounting department.
1.6 Financial Markets Environment
A financial market is a platform where buyers and sellers trade
financial securities, commodities, and other fungible items at
low transaction costs.
Market Type Definition Example
Primary Market Market where securities are initially created
and sold (e.g., IPO). Government Bond Auction
Secondary Market Market where pre-owned securities are
traded between investors. JSE (Johannesburg Stock Exchange)
Money Market Market for short-term debt instruments
(maturity < 1 year). Treasury Bills, Bankers Acceptances
Capital Market Market for long-term securities (maturity > 1
year). Long-term Bonds, Equities
1.7 Forms of Business Organisation
Understanding the legal structure of a business is crucial as it
impacts tax liability and access to capital.
Structure Key Features Pros Cons
:--- :--- :--- :---
Sole Proprietor Single owner; no legal distinction between
owner and business. Easy to start; Owner retains all profits.
Unlimited Liability; Difficult to raise capital.
Partnership Two or more owners; governed by a partnership
agreement. Shared expertise; More capital than sole prop.
Unlimited Liability (unless Limited Partner); Potential for
conflict.
,FIN2603 Exam Pack 2026:
Comprehensive Notes, Past Papers
& Solutions for Financial
Management for Non-Financial
Managers (UNISA) – Achieve High
Marks!
FIN2603: Financial Management for Non-Financial Managers
Module 1: Introduction to Managerial Finance
---
1.1 What is Financial Management?
Financial management refers to the art and science of
managing money within an organisation. It encompasses the
planning, organising, directing, and controlling of financial
activities such as procurement and utilisation of funds.
1.2 The Primary Goal of the Firm
- Objective: Maximise Shareholder Wealth
- Measurement: This is measured by the Market Price per
Share, NOT by Earnings Per Share (EPS) or simple Profit
Maximisation.
- Key Distinction: While profit maximisation focuses on short-
term gains, wealth maximisation considers long-term value,
risk, and timing of returns.
1.3 The Agency Relationship & Problem
- Agency Relationship: The contractual relationship between
the Principals (Shareholders) and the Agents (Management) .
Shareholders employ managers to run the company on their
behalf with the expectation that share value will increase.
- Agency Problem: A conflict of interest arises when
management pursues personal goals (e.g., lavish perks, empire
building, job security) at the expense of shareholder wealth.
,- Agency Costs: Costs incurred by shareholders to align
management's interests with their own. These include:
- Monitoring Costs: External audits and internal controls to
prevent abuse of funds.
- Bonding Costs: Contractual limitations on management
decisions.
- Incentive Compensation: Bonus shares, performance
bonuses, and stock options designed to motivate managers to
increase share price.
1.4 Social Corporate Responsibility (CSR) & Governance
- Corporate Social Responsibility (CSR): Voluntary investment in
socially beneficial projects (e.g., sustainability, community
outreach). While not directly profit-driven, effective CSR
enhances corporate image and brand loyalty, leading to
increased shareholder wealth in the long term.
- Corporate Governance: The framework of rules, policies, and
ethical standards by which a company is directed and
controlled. It ensures accountability, fairness, and transparency
in a firm's relationship with all its stakeholders.
---
Page 3
Module 1 (Continued): Functions, Markets & Business
Structures
---
1.5 Core Functions of the Financial Manager
The Financial Manager acts as the gatekeeper of the
organisation's capital. Key responsibilities include:
- Capital Acquisition: Raising funds through debt or equity
markets.
- Investment Decisions (Capital Budgeting): Evaluating and
selecting long-term projects that add value to the firm.
, - Working Capital Management: Managing short-term assets
(inventory, cash) and liabilities to ensure operational liquidity.
- Treasury & Oversight: Managing cash flow, foreign exchange
risk, and supervising the accounting department.
1.6 Financial Markets Environment
A financial market is a platform where buyers and sellers trade
financial securities, commodities, and other fungible items at
low transaction costs.
Market Type Definition Example
Primary Market Market where securities are initially created
and sold (e.g., IPO). Government Bond Auction
Secondary Market Market where pre-owned securities are
traded between investors. JSE (Johannesburg Stock Exchange)
Money Market Market for short-term debt instruments
(maturity < 1 year). Treasury Bills, Bankers Acceptances
Capital Market Market for long-term securities (maturity > 1
year). Long-term Bonds, Equities
1.7 Forms of Business Organisation
Understanding the legal structure of a business is crucial as it
impacts tax liability and access to capital.
Structure Key Features Pros Cons
:--- :--- :--- :---
Sole Proprietor Single owner; no legal distinction between
owner and business. Easy to start; Owner retains all profits.
Unlimited Liability; Difficult to raise capital.
Partnership Two or more owners; governed by a partnership
agreement. Shared expertise; More capital than sole prop.
Unlimited Liability (unless Limited Partner); Potential for
conflict.
