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INTRODUCTION OFINTRODUCTION OF

FINANCIALFINANCIAL

MANAGEMENTMANAGEMENT

BYBY

SAVNESH UPADHYAYSAVNESH UPADHYAY

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What is financial management?Financial management is about planning income andexpenditure, and making decisions that will enable

you to survive financially.

Financial management includesfinancial planning and budgeting,

financial accounting

financial analysis,

financial decision-making and action

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What is the objective of financialmanagement?

Profit Maximization:

The objective of financial management is the

same as the objective of a company which is toearn profit. But profit maximization alone cannot

be the sole objective of a company. It is a limitedobjective. If profits are given undue importancethen problems may arise as discussed below.

The term profit is vague and it involves much

more contradictions. Profit maximization must beattempted with a realization of risks involved. Apositive relationship exists between risk andprofits. So both risk and profit objectives shouldbe balanced.

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What is the objective of financialmanagement?

Wealth MaximizationWealth Maximization

The value of a firm is represented by the market price of thecompany's stock. The market price of a firm's stock represents

the assessment of all market participants as to what the value ofthe particular firm is.

Return MaximizationReturn Maximization

The second goal of f inancial management is to safeguard theeconomic interest of the persons who are directly or indirectly

connected with the company, i.e.,shareholders, creditors andemployees. The all such interested parties must get themaximum return for their contributions. But this is possible onlywhen the company earns higher profits or sufficient profits todischarge its obligations to them. Therefore, the goal ofmaximization of returns are inter-related.

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What is the objective of financialmanagement?

To plan a sound capital :To plan a sound capital :

There should be sound and fair composition of

capital so that a balance is maintained between debtand equity capital

To ensure safety on investmentTo ensure safety on investment

Funds should be invested in safe ventures so thatadequate rate of return can be achieved

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What is the objective of financialmanagement?

Wealth MaximizationWealth Maximization

The value of a firm is represented by the market price of thecompany's stock. The market price of a firm's stock represents

the assessment of all market participants as to what the value ofthe particular firm is.

Return MaximizationReturn Maximization

The second goal of f inancial management is to safeguard theeconomic interest of the persons who are directly or indirectly

connected with the company, i.e.,shareholders, creditors andemployees. The all such interested parties must get themaximum return for their contributions. But this is possible onlywhen the company earns higher profits or sufficient profits todischarge its obligations to them. Therefore, the goal ofmaximization of returns are inter-related.