FINANCIALFINANCIALMANAGEMENMANAGEMEN

TT II II

FINANCIALFINANCIALMANAGEMENMANAGEMEN

TT II II

Risks

Financial Management IFinancial Management IFinancial Management IFinancial Management I

Organizational Purpose and GoalsOrganizational Purpose and Goals

Financial PoliciesFinancial Policies

StrategiesStrategies

DecisionsDecisions• Asset managementAsset management• Investment decisionsInvestment decisions• Financing decisionsFinancing decisions• Dividend policyDividend policy• Valuation of the firmValuation of the firm

Financial Management IIFinancial Management IIFinancial Management IIFinancial Management II

Analysis

Wealth maximizationLong-term financingCapital budgetingRisk managementCapital acquisition analysisCapital structure decisionDividend decisionValuation of financial instruments

FINANCIAL MANAGEMENT II

Topics under Financial Management II

• Risk and Return of Assets• Risk Management• Valuation of Financial Assets

Bonds Stocks

• Long-term Investment Decisions Capital Budgeting Advanced Investing Decisions

• Long-term Financing Decisions Cost of Capital Leverage and Capital Structure Dividend Policy

FINANCIAL MANAGEMENT II

Topics under Financial Management II

• Mergers and Acquisitions• International Financial Management Decisions• Financial Objectives of Special Types of

Organizations• Financial Management in the Public Sector• Other Topics

FINANCIAL MANAGEMENT II

Strategies/Methods of Learning the Course

• Lecture (concepts, principles, computations, casestudies)

• Recitations• Seatwork (includes solving exercises/problems in

the blackboard and explaining the answers/solutions

• Assignments (readings, exercises/problems forsolving)

• Group Discussion/Group Presentation• Invitation of resource speakers (accomplished

individuals or experts in the field)

FINANCIAL MANAGEMENT II

Let’s have a quick review of Let’s have a quick review of Financial Management I !Financial Management I !

FINANCIAL MANAGEMENT II

What isWhat isFinancial Financial

Management?Management?

FINANCIAL MANAGEMENT II

Financial management Financial management is the business function that is the business function that concerns the concerns the acquisitionacquisition, , financingfinancing and and management management of assetsof assets with the with the primary primary goal of maximizing goal of maximizing shareholders’ wealthshareholders’ wealth by by increasing the value of their increasing the value of their shares. shares.

FINANCIAL MANAGEMENT II

Investment DecisionsInvestment Decisions

What is the optimal firm size?What is the optimal firm size? What specific assets should be What specific assets should be

acquired?acquired? What assets (if any) should be What assets (if any) should be

reduced or eliminated?reduced or eliminated?

FINANCIAL MANAGEMENT II

Financing DecisionsFinancing Decisions

What is the best type of financing? What is the best type of financing? What is the best financing mix?What is the best financing mix?What is the best dividend policy?What is the best dividend policy?How will the funds be physically How will the funds be physically acquired?acquired?

FINANCIAL MANAGEMENT II

Asset Management DecisionsAsset Management Decisions

How do we manage existing assetsHow do we manage existing assetsefficiently?efficiently?

Trade-off

DailyDaily Cash management

(receipt and disbursement of funds) Credit management

Inventory control Short-term financing Exchange and interest rate hedging Bank relations

Intermediate financingBond issuesLeasingStock issuesCapital budgetingDividend decisionsForecasting

ProfitabilityProfitability

Risk

Goal:Goal:MaximizeMaximizeshareholdershareholderwealthwealth

PPT 1-10

Occasional

FINANCIAL MANAGEMENT II

Functions of the Finance ManagerFunctions of the Finance Manager