https://www.youtube.com/channel/
UCebFQZn1bNQQJkx0YmJgoUQ • In this chapter, the students were
introduced into the field of finance and the
Introduction to Financial
opportunities in the financial services and
managerial finance.
Management •The basic legal forms of business
organization such as the sole proprietorship,
partnership, and corporation are described
and differentiated from each other. The
Learning Objectives: strengths and weaknesses of these three
basic legal forms of organizations were
1. Define finance management and the identified.
three key elements to the process of
financial management. • The managerial finance function is defined
and compared with economics and
2. Identify the major areas and opportunities accounting. The financial manager's goals,
available in the field of finance. which are to maximize the shareholders'
wealth and to preserve stakeholder wealth,
3. Determine and compare the legal forms were discussed.
of business organization.
• The role of ethics in achieving these goals
4. Describe the managerial finance function is presented. The chapter then summarizes
and its relationship to the three key activities of the financial
manager. It also includes discussion of the
economics and accounting. 5. Determine agency problem-the conflict that exists
the roles of the financial manager. between managers and owners in a large
corporation..
6. Identify the goal of the firm, corporate
governance, the role of ethics, Financial Management
and the agency issue. • Financial Management is about preparing,
directing and managing the money activities
7. Discuss business taxes and their of a company such as buying, selling and
importance in financial decisions. using money to its best results to maximize
wealth or produce best value for money.
Basically, it means applying general
OVERVIEW management concepts to the cash of the
company.
• Finance plays an important role in the
student's professional and even personal • Taking a commercial business as the most
life. Each chapter of this book emphasizes common organizational structure, the key
the relevance of the topic to majors in objectives of financial management would
accounting, management, marketing, be to create wealth for the business,
operations and information systems.
,generate cash and provide an adequate interest of shareholders and in accordance
return on investment bearing in mind the with business rules.
risks that the business is taking, and the
resources invested 3. Financial decision making. The key
aspects of financial decision-making include
• Personal finance deals with an investment, financing and dividends.
individuals' decisions concerning the Investments must be financed in some way.
spending and investing of income. It However, there are always financing
includes the answers as to how much of alternatives that can be considered, which
their earnings should they spend, how much will depend on the source, period of
they should save, and how they should financing, cost of financing and the net
invest their savings. present returns generated. The key
financing decision is whether profit earned
• Business finance involves the same type by the business should be retained instead
of decisions focusing on how the firms raise of distributing to shareholders via dividends.
money from investors, how to invest money Dividends that are too high may cause the
to earn a profit, and how to reinvest profits business to starve of funding to reinvest in
in the business or distribute them back to growing revenues and profits further.
investors.
Scope of Financial Management
There are three key elements to the
process of financial management. These Financial management has a wide scope. It
are financial planning, financial control and includes the following five 'A's as stated by
financial decision making. Dr. S. C. Saxena:
1. Financial Planning. Management needs 1. Anticipation. The financial needs of the
to ensure that enough funding is available at company are being estimated. That is, it
the right time to meet the needs of the finds out how much finance is required by
business. In the short term, funding may be the company.
needed to invest in equipment and stocks,
pay employees and fund sales made on 2. Acquisition. It collects finance for the
credit. In the medium and long term, funding company from different sources,
may be required for significant additions to
the productive capacity of the business or to 3. Allocation. It uses this collected or
make acquisitions. This links in with the acquired finance to purchase fixed and
financial decision-making process and current assets for the company.
forecasting.
4. Appropriation. It distributes part of the
2. Financial control helps the business company profits among the shareholders,
ensure that the objectives are being met. debenture holders, and some are kept as
Financial control determines if assets are reserves.
secured and being used efficiently. It also
identifies if the management acts in the best 5. Assessment. It also means controlling all
the financial activities of the company. It
, checks if the objectives are met. If not, it
determines what can be done about it The following are the professional
Finance Areas and Career Opportunities certifications in finance:
The following are the major areas in the 1. Chartered Financial Analyst (CFA) - a
field of finance; graduate-level course of study focused
largely on the investments side of finance.
1. Financial service the one concerned This is offered by the CFA Institute.
with the design and delivery of advice and
financial products to individuals, 2. Certified Treasury Professional (CTP)
businesses, and governments. Career this program requires students to pass a
opportunities: within the areas of banking, single exam that is focused on the
personal financial planning. investments, knowledge and skills needed for those
real estate, and insurance. working in a corporate treasury department
2. Managerial finance concerned with the 3. Certified Financial Planner (CFP) -
duties of the financial manager working in a Students should pass a 10-hour exam
business. This encompasses financial covering a wide range of topics related to
planning or budgeting, extending credit to personal financial planning in order to obtain
customers or other credit administration CFP status.
functions, investment evaluation and
analysis, and obtaining funds for a firm. 4. American Academy of Financial
Managerial finance is the management of Management (AAFM) - This administers
the firm's funds within the firm. certification programs for financial
professionals in a wide range of fields. Their
Career opportunities: financial analyst, certifications include the Charter Portfolio
capital budgeting analyst, and cash Manager, Chartered Asset Manager,
manager. Certified Risk Analyst, Certified Cost
Accountant, Certified Credit Analyst, and
● The recent global financial crisis and many other programs.
subsequent responses by
governmental regulators, increased 5. Professional Certifications in
global competition, and rapid Accounting include Certified Public
technological change also increase Accountant (CPA). Certified Management
the importance and complexity of the Accountant (CMA), Certified Internal
financial manager's duties. Auditor (CIA), and many other programs.
Increasing globalization has
increased demand for financial
experts who can manage cash flows
in different currencies and protect
against the risks that naturally arise
from international transactions.
UCebFQZn1bNQQJkx0YmJgoUQ • In this chapter, the students were
introduced into the field of finance and the
Introduction to Financial
opportunities in the financial services and
managerial finance.
Management •The basic legal forms of business
organization such as the sole proprietorship,
partnership, and corporation are described
and differentiated from each other. The
Learning Objectives: strengths and weaknesses of these three
basic legal forms of organizations were
1. Define finance management and the identified.
three key elements to the process of
financial management. • The managerial finance function is defined
and compared with economics and
2. Identify the major areas and opportunities accounting. The financial manager's goals,
available in the field of finance. which are to maximize the shareholders'
wealth and to preserve stakeholder wealth,
3. Determine and compare the legal forms were discussed.
of business organization.
• The role of ethics in achieving these goals
4. Describe the managerial finance function is presented. The chapter then summarizes
and its relationship to the three key activities of the financial
manager. It also includes discussion of the
economics and accounting. 5. Determine agency problem-the conflict that exists
the roles of the financial manager. between managers and owners in a large
corporation..
6. Identify the goal of the firm, corporate
governance, the role of ethics, Financial Management
and the agency issue. • Financial Management is about preparing,
directing and managing the money activities
7. Discuss business taxes and their of a company such as buying, selling and
importance in financial decisions. using money to its best results to maximize
wealth or produce best value for money.
Basically, it means applying general
OVERVIEW management concepts to the cash of the
company.
• Finance plays an important role in the
student's professional and even personal • Taking a commercial business as the most
life. Each chapter of this book emphasizes common organizational structure, the key
the relevance of the topic to majors in objectives of financial management would
accounting, management, marketing, be to create wealth for the business,
operations and information systems.
,generate cash and provide an adequate interest of shareholders and in accordance
return on investment bearing in mind the with business rules.
risks that the business is taking, and the
resources invested 3. Financial decision making. The key
aspects of financial decision-making include
• Personal finance deals with an investment, financing and dividends.
individuals' decisions concerning the Investments must be financed in some way.
spending and investing of income. It However, there are always financing
includes the answers as to how much of alternatives that can be considered, which
their earnings should they spend, how much will depend on the source, period of
they should save, and how they should financing, cost of financing and the net
invest their savings. present returns generated. The key
financing decision is whether profit earned
• Business finance involves the same type by the business should be retained instead
of decisions focusing on how the firms raise of distributing to shareholders via dividends.
money from investors, how to invest money Dividends that are too high may cause the
to earn a profit, and how to reinvest profits business to starve of funding to reinvest in
in the business or distribute them back to growing revenues and profits further.
investors.
Scope of Financial Management
There are three key elements to the
process of financial management. These Financial management has a wide scope. It
are financial planning, financial control and includes the following five 'A's as stated by
financial decision making. Dr. S. C. Saxena:
1. Financial Planning. Management needs 1. Anticipation. The financial needs of the
to ensure that enough funding is available at company are being estimated. That is, it
the right time to meet the needs of the finds out how much finance is required by
business. In the short term, funding may be the company.
needed to invest in equipment and stocks,
pay employees and fund sales made on 2. Acquisition. It collects finance for the
credit. In the medium and long term, funding company from different sources,
may be required for significant additions to
the productive capacity of the business or to 3. Allocation. It uses this collected or
make acquisitions. This links in with the acquired finance to purchase fixed and
financial decision-making process and current assets for the company.
forecasting.
4. Appropriation. It distributes part of the
2. Financial control helps the business company profits among the shareholders,
ensure that the objectives are being met. debenture holders, and some are kept as
Financial control determines if assets are reserves.
secured and being used efficiently. It also
identifies if the management acts in the best 5. Assessment. It also means controlling all
the financial activities of the company. It
, checks if the objectives are met. If not, it
determines what can be done about it The following are the professional
Finance Areas and Career Opportunities certifications in finance:
The following are the major areas in the 1. Chartered Financial Analyst (CFA) - a
field of finance; graduate-level course of study focused
largely on the investments side of finance.
1. Financial service the one concerned This is offered by the CFA Institute.
with the design and delivery of advice and
financial products to individuals, 2. Certified Treasury Professional (CTP)
businesses, and governments. Career this program requires students to pass a
opportunities: within the areas of banking, single exam that is focused on the
personal financial planning. investments, knowledge and skills needed for those
real estate, and insurance. working in a corporate treasury department
2. Managerial finance concerned with the 3. Certified Financial Planner (CFP) -
duties of the financial manager working in a Students should pass a 10-hour exam
business. This encompasses financial covering a wide range of topics related to
planning or budgeting, extending credit to personal financial planning in order to obtain
customers or other credit administration CFP status.
functions, investment evaluation and
analysis, and obtaining funds for a firm. 4. American Academy of Financial
Managerial finance is the management of Management (AAFM) - This administers
the firm's funds within the firm. certification programs for financial
professionals in a wide range of fields. Their
Career opportunities: financial analyst, certifications include the Charter Portfolio
capital budgeting analyst, and cash Manager, Chartered Asset Manager,
manager. Certified Risk Analyst, Certified Cost
Accountant, Certified Credit Analyst, and
● The recent global financial crisis and many other programs.
subsequent responses by
governmental regulators, increased 5. Professional Certifications in
global competition, and rapid Accounting include Certified Public
technological change also increase Accountant (CPA). Certified Management
the importance and complexity of the Accountant (CMA), Certified Internal
financial manager's duties. Auditor (CIA), and many other programs.
Increasing globalization has
increased demand for financial
experts who can manage cash flows
in different currencies and protect
against the risks that naturally arise
from international transactions.
