finance functions

FINANCE FUNCTIONS

FINANCE FUNCTIONS

TRADITIONAL CONCEPTS

MODERN CONCEPTS

Traditional Concept Of Finance Function

Primary responsibility of a finance manager is to raise necessary funds to meet operating requirements of the business

Criticismsi. Narrow approachii. Over emphasized on non recurring problemsiii. Concentrated attention to problems of

corporation financeiv. Laid more stress on problems of long term

financing

MODERN CONCEPT OF FINANCE CONCEPT

Procurement of funds as well as application of funds

Finance manager is concerned withi. All financial activities like planning, raising,

allocating and controlling funds andii. Problems of incorporation, liquidation,

consolidation, re organisation.

MODERN CONCEPT OF FINANCE FUNCTION

RECURRING FINANCE

FUNCTION

NON RECURRING FINANCE

FUNCTION

RECURRING FINANCE FUNCTION

PLANNING FOR

FUNDS

RAISING OF

FUNDS

ALLOCATION

OF FUNDS

ALLOCATION

OF INCOM

E

CONTROL OF FUNDS

i. Planning for funds

Task of finance manager in a new or going concern is to formulate financial plan for the firm

He has to aim at synchronizing the cash inflows and cash outflows

Two methods of estimating funds requirementsi. Balance sheet methodii. Cash budget method

ii. Raising of funds

Procurement of capitali. Security Issues orii. Borrow money from financial institutions

iii. Allocation of Funds

In allocating the funds consideration must be given to the factors such as Competing use, immediate requirements, managements of assets etc

While managing cash the finance manager should profitability and liquidity of the corporation

Managing fixed assets, inventories

iv. Allocation of Income

Allocation of annual earningsRetaining the income for financing expansion

of business or distribution to the owners as dividend as a return of capital

NON-RECURRING FINANCE FUNCTION

Refers to those financial activities that a finance executive has to perform very infrequently