financial management & goal
DESCRIPTION
Defination of Financial Management Major Areas Corporates Corporate Structure Corporate Objectives & Strategy Factors influencing Corporate Objectives Primary vs Secondary Objectives Strategies(Corporate) / Tactical (Functional) Role Of a Financial ManagerTRANSCRIPT
Financial Management & Goal Presented by
Muhammad Usman
Business And Finance: A financial system that channels resources into socially useful and productive activities that respect environmental limits.
Businesses are powerful agents for innovation and must be part of the solution.
What Is Finance? Finance is the study of how investors allocate their assets over time under conditions of certainty and uncertainty. A key point in finance, which affects decisions, is the time value of money, which states that a dollar today is worth more than a dollar tomorrow. Finance measures the risks vs. profits and gives an indication of whether the investment is good or not.
Financial Management & Goals
• 1. A branch of economics concerned with resource allocation as well
as resource management, acquisition and investment. Simply, finance deals with
matters related to money and the markets.
• 2. To raise money through the issuance and sale of debt and/or equity.
Defination:
Definition Of Financial Management: The Planning, directing, monitoring,
organizing, and controlling of the monetary resources of an organization.
The areas and opportunity can be divided into two broader catagories.
Financial services
Managerial Finance
1). Financial services: The area of finance concerned with the design and delivery of advice and financial products to individual business and government.
2). Managerial Finance: Concerned with the duties of the financial manager in the business firm.
Financial Manager: Actively mange the financial affairs of any type of business, weather financial or nonfinancial, private or public, large or small, profit seeking or not-for- profit.
Major Area And Opportunity In Finanace
The three most common legal form of business organization are:
The sole proprietorship
The partnership
The corporation.
Sole Proprietorship: A business owned by one person and operated for his or her own profit. This is the easiest form of business to set up, and the easiest to dissolve. Sole proprietor have unlimited liabilities.
Partnership: A business owned by two or more person and operated for profit. The written contract used to formally establish a business partnership. In partnership business one partner has unlimited liabilities. The partner with unlimited liability is generally the initial person who started the partnership and owns the majority of the company.
Legal Forms Of Business Organization
Corporation: A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members.
There are many different forms of corporations.
Many corporations are established for business purposes but public bodies, charities and clubs are often corporations as well.
Corporations take many forms including:
Statutory Corporations
Corporations Sole
Joint-stock Companies
Co-operatives
An important contemporary feature of a corporation is limited liability. If a corporation fails, shareholders may lose their investments, and employees may lose their jobs, but
neither will be liable for debts to the corporation's creditors.
Stockholders: The owner of a corporation, whose ownership, or equity, is evidenced by either Common stock or Preferred stock.
Common Stock: The purest and most basic form of corporate ownership.
Dividend: Periodic distribution of earning to the stockholders of a firm.
Board of Director: Group elected by the firm`s stockholders and typically responsible for developing strategic goals and plans, setting general policy, guiding corporate affairs, approving major expenditures, and hiring/firing, compensating, and monitoring key officers and executives.
President Or Chief Executive Officer ( CEO): CEO is responsible for managing day to day operation and carrying out the policies established by the board of directors. The CEO is required to reports periodically to the firm`s directors.
Organizational Structure:
Stockholders
Board Of Directors
President ( CEO )
Vice President Human
Resource
Vice President Manufacturing
Vice President Finance ( CFO)
Treasurer
Capital Expenditure
Manager
Financial Planing &
Fund-Raising Manager
Credit Manger
Cash Manager
Foreign Exchange Manager
Pension Fund Manger
Controller
TaxManager
Corporate Accounting
Manager
Cost Accounting
Manager
Financial Accounting
Manager
Vice President Marketing
Vice President Information Resources
what the business wants to achieve. Business strategy is about how those corporate objectives are to be achieved.
Business strategy is concerned with deciding which markets and activities the business should be involved in:
where it wants to be
how it is going to get there.
Strategy is about making high-level decisions and forms the management game plan for:
Satisfying customers (meeting customer needs)
Running the business (organizing resources in the most efficient and effective way)
Beating the competition (strategies and tactics to gain competitive advantage)
Achieving corporate objectives
Corporate Objectives And Strategy
Corporate objectives are set at the high level and are quite distinct from any more detailed functional objectives set for the functional areas of a business. Examples of corporate objectives would include targets for:
Sales Revenue:
A traditional measure of the size and strength of a business
If revenue is growing then the business is growing
Profit:
Both the absolute level of profit and the profit margin i.e. return on sales
Return On Investment:
Particularly important for capital-intensive businesses
Growth:
Sales Volume,
Revenue,
Profit,
Earnings per share
Market share: Proportion of markets and industries owned by the business or its products. Cash flow: This can be similar to a profit objective, but with the focus on maximizing the net cash inflow of the business. Shareholder value: Particularly important for publicly Quoted businesses where senior management are tasked with growing the value of the business. Corporate image & reputation: Increasingly important: links closely with corporate social responsibility, product and customer service quality business ethics
Primary Objectives:
• The ultimate, long term goals of the business (3-10 years typically) These are the key strategic objectives such as profit growth or shareholder returns
Secondary Objectives:
•Make a direct contribution to meeting primary objectives E.g. sales growth will help business achieve profit target Also known as tactical objectives Usually focused on the short or medium-term (1-3 years)
Corporate objectives can also be considered the main or primary objectives of a business. The set the agenda for the secondary objectives:
STRATEGIC (CORPORATE)
Focused on long-term
Set by the Board
Involve higher risk & uncertainty
Likely to involve significant
investment / business
resources
Difficult to change in the short-
term
Stretching & challenging
Focused on short-term
Set by line management
Relatively low-risk
Limited resources invested
Relatively easy to change at
minor financial cost
Realistic & achievable.
TACTICAL (FUNCTIONAL)
A similar distinction can also be made between strategic (corporate) and
tactical (functional) objectives:
FINANCIAL MANAGER: A financial manager is responsible for providing financial advice and support to colleagues and clients to enable them to make sound business decisions. The role of the financial manager is more than simply accounting; it is multifunctional. Financial managers must understand all aspects of the business so that they are able to adequately advise and support the chief executive officer in decision-making and ensuring company growth and profitability.
ROLES OF FINANCIAL MANAGERS: Almost every firm, government agency, or other type of organization has one or more financial managers.
Financial managers oversee the preparation of financial reports, direct investment activities, and implement cash management strategies.
They also implement the long-term goals of their organization.
Many corporations operate multifunctional teams where the financial manager is responsible for a particular division or function, or looks after a range of departments and functions. Financial managers often have specific roles and titles:
Role Of Financial Managers:
Controllers prepare financial reports and analyses of future earnings or expenses that summarize the organization’s financial position. Controllers are also in charge of preparing special reports required by regulatory authorities—especially important because of the Sarbanes–Oxley Act, designed in part to protect investors from fraud.
Treasurers and finance officers direct and oversee budgets, monitor the investment of funds, manage associated risks, supervise cash management activities, execute capital raising strategies, and deal with mergers and acquisitions.
Risk and insurance managers administer programs to minimize risks and losses that could arise from financial transactions and business operations.
Credit managers supervise the firm’s issuance of credit, fix credit-rating criteria, determine credit limits, and monitor the collection of past-due accounts.
Cash managers supervise and manage the flow of cash receipts and disbursements to meet business and investment needs.
The financial manager’s role, particularly in business, is changing in response to technological advances that have significantly reduced the time it takes to produce financial reports. Financial managers now perform more data analysis to offer senior management ideas on how to maximize profits.
They play an increasingly significant role in mergers and acquisitions and in related financing, and in areas that require wide-ranging, focused knowledge to diminish risks and maximize profit.
ADVANTAGES:
Financial managers improve business organization and risk management by providing reassurance on the effectiveness and efficiency of operations, financial reporting, and compliance with applicable laws and regulations.
Financial managers provide management with an in-depth and unbiased understanding of risks that the organization may be facing, allowing for preemptive planning.
Financial managers give company officers and directors forewarning of ethical and legal issues that may affect the organization.
Although they are meant to be independent and impartial, financial managers are paid by the company and are an integral part of the company management; this can lead to conflicts of interest when advising senior management on, for example, investment risk.
Financial managers’ judgments, estimates, and interpretations are not always objective because of their close relationship with the organization for which they work.
DISADVANTAGES:
Advantages And Disadvantages
Conclusion: The Financial Management describes the principal processes in managing the financial aspect of the IT organization, addresses financial risk as part of these processes, and discusses the means to measure the value realized from IT solutions.
The major financial management processes described by the Financial Management are:
Establish service requirements and plan budget.
Manage finances.
Perform IT accounting and reporting.
