FM - Assignment #1

Shena M.
Sernada
BSBA- Financial Management
ASSIGNMENT 1
1. What is Finance?
Finance is a term for matters regarding the management, creation, and study of money and
investments. Specifically, it deals with the questions of how an individual, company or government
acquires money. In other words, Finance is when we grant or give some funds and manage the funds
for some individual, business, and government. In simple words, finance is the management of
money, including investing, renting, saving, lending, budgeting.
2. General Areas of Finance
 Corporate Finance
 Investments
 Financial institutions and market
 International finance
3. The importance of Finance
Finance is very essential as its assists in the formation of new businesses, and allows
businesses to take advantage of opportunities to grow, employ local workers and in turn support other
businesses and local, state and federal government through the remittance of income taxes. Finance
not only helps the company’s progression, but also finance is a vital key in the economy since
financial structures fund businesses and companies, contributing to job growth and, in turn, growing
economic development and trade. Increased trade leads to increased competition, such as sales and
marketing that increase jobs in these sectors further.
4. What is Financial Management?
Financial Management is a vital activity in any organization. It is the process of planning,

organizing, controlling and monitoring financial resources with a view to achieve organizational goals
and objectives. It is an ideal practice for controlling the financial activities of an organization such as
procurement of funds, utilization of funds, accounting, payments, risk assessment and every other
thing related to money.
In other terms, Financial Management is the application of general principles of management

to the financial possessions of an enterprise. Proper management of an organization’s finance
provides quality fuel and regular service to ensure efficient functioning. If finances are not properly
dealt with an organization will face barriers that may have severe repercussions on its growth and
development.
5. Goals and function of Financial Management
Objectives of Financial Management:
 To ensure regular and adequate supply of funds to the concern.

 To ensure adequate returns to the shareholders which will depend upon the
earning capacity, market price of the share, expectations of the shareholders.
 To ensure optimum funds utilization. Once the funds are procured, they
should be utilized in maximum possible way at least cost.
 To ensure safety on investment, i.e, funds should be invested in safe
ventures so that adequate rate of return can be achieved.
 To plan a sound capital structure-There should be sound and fair composition
of capital so that a balance is maintained between debt and equity capital.
Functions of Financial Management
 Estimation of capital requirements

 Determination of capital composition
 Choice of sources of funds
 Investment of funds
 Disposal of surplus
 Management of cash
 Financial controls
6. Evolution in the field of Finance
Financial management emerged as a distinct field of study around 20th century. Its evolution is
divided into three broad phases:
Traditional phase – This phase started from 1920 and lasted till 1940. During this phase focus was
mainly on below aspects:
 Arranging, formation, issuance of funds
 Business expansion, merger, reorganization, and liquidation during the life cycle of the firm
 The instruments of financing, the institutions and procedures used in capital markets, and the
legal aspects of financial events
Transitional phase – This phase started from early 1940 and lasted till early 1950. During this phase
focus was mainly on below aspects:
 Nature of financial management was similar to same as Traditional phase
 But more emphasis was put on financial problems faced by managers in day to day
operations hence leading to increased focus on working capital management
Modern phase – This phase started in middle of 1950 and has witnessed an accelerated pace of
development with the infusion of ideas from economic theories and applications of quantitative
methods of analysis. During this phase focus was mainly on below aspects:
 The scope of financial management got broadened
 A well-managed Finance department came into existence
 Role of Financial manager got defined , which include acquisition of funds required in the
business at the least possible cost ,investing the funds obtained in an optimum manner so as
to maximize returns and taking decisions relating to distribution of profits i.e. deciding the
dividend policy and retention of profits

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Shena M.

2. General Areas of Finance

3. The importance of Finance

4. What is Financial Management?

Financial Management is a vital activity in any organization. It is the process of planning,

In other terms, Financial Management is the application of general principles of management

5. Goals and function of Financial Management

Objectives of Financial Management:

 To ensure regular and adequate supply of funds to the concern.

 Estimation of capital requirements

6. Evolution in the field of Finance

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