Dr. Zulfiqar Hasan
Finance is the process of transferring funds from surplus economic unit to deficit economic unit.
Financial management can be defined as the process of acquiring and using funds to accomplish a financial objectives.
a. Anticipating Financial Needs
b. Acquiring financial resources
c. Allocating Funds in business
d. Administrating the allocation of funds
e. Analyzing the performance of funds
f. Reporting to the management
This is a core course for MBA and BBA Program.
This topic will cover: Definition of Financial Management, Financial management decisions, The balance sheet model of the firm, Pie model of Capital structure. Modern World Perspective: Globalization of Business, Information Technology, and Regulatory Attitude of Management.
Importance of Financial Management, Goals of the Corporation: Agency costs and agency problems-the set of contracts perspective, Separation Theorem, Financial Environment: External Environment, Business Ethics, MNCs.
Factors Influencing Financial Management Decisions
i. Size of the firm
ii. Nature of Business
iii. The legal forms of business organizations
iv. Situation of business cycle
v. Assets structure
vi. Regulatory and adequacy of income
vii.Economic life of business
viii. Terms of credit
iX. Management Philosophy
i. Government Regulations
ii. Tax System
iii. Economic Condition of the country
iv. Political Condition of the country
v. Condition of money market
vi. Condition of capital market
Financial Manager and his Jobs
Financial Manger is a person who actively manages the financial affairs of any type of business, whether financial or nonfinancial, private or public, large or small, profit-seeking or not-for profit.
They often work on teams, acting as business advisors to top executives.
Types of Financial Manager are:
c. Cash Manager
d. Credit Manager
e. Risk Manager
f. Insurance Manager
Their functions are:
- Try to make smart investment decisions.
- Try to make smart financing decisions.
- Prepare financial statements, business activity reports, and forecasts
- Monitor financial details to ensure that legal requirements are met
- Supervise employees who do financial reporting and budgeting
- Review company financial reports and seek ways to reduce costs
- Analyze market trends to find opportunities for expansion or for acquiring other companies
- Help management make financial decisions
Importance of Financial Management
01. Financial Planning
Financial management helps to determine the financial requirement of the business concern and leads to take financial planning of the concern. Financial planning is an important part of the business concern, which helps to promotion of an enterprise.
02. Acquisition of Funds
Financial management involves the acquisition of required finance to the business concern. Acquiring needed funds play a major part of the financial management, which involve possible source of finance at minimum cost.
03. Proper Use of Funds
Proper use and allocation of funds leads to improve the operational efficiency of the business concern. When the finance manager uses the funds properly, they can reduce the cost of capital and increase the value of the firm.
04. Financial Decision
Financial management helps to take sound financial decision in the business concern. Financial decision will affect the entire business operation of the concern. Because there is a direct relationship with various department functions such as marketing, production personnel, etc.
05. Improve Profitability
Profitability of the concern purely depends on the effectiveness and proper utilization of funds by the business concern. Financial management helps to improve the profitability position of the concern with the help of strong financial control devices such as budgetary control, ratio analysis and cost volume profit analysis.
06. Increase the Value of the Firm
Financial management is very important in the field of increasing the wealth of the investors and the business concern. Ultimate aim of any business concern will achieve the maximum profit and higher profitability leads to maximize the wealth of the investors as well as the nation.
07. Promoting Savings
Savings are possible only when the business concern earns higher profitability and maximizing wealth. Effective financial management helps to promoting and mobilizing individual and corporate savings.
Contributor: Dr. Dr. Zulfiqar Hasan working as an Associate Professor (Finance). He has done his MBA from London School of Commerce (LSC), London, UK.
He has also been the Program Coordinator, MBA program, Northern University Bangladesh (NUB), Dhaka and in the same capacity in Bangladesh Islami University, Dhaka.
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