Financial Management

Preface Financial Management is an essential part of the economic and non economic activities which leads to decide the efficient procurement and utilization of finance with profitable manner. In the olden days the subject Financial Management was a part of accountancy with the traditional approaches. Now a days it has been enlarged with innovative and multi dimensional functions in the field of business with the effect of industrialization, Financial Management has become a vital part of the business concern and they are concentrating more in the field of Financial Management. Financial Management also developed as corporate finance, business finance, financial economics, financial mathematics and financial engineering. Understanding the basic concept about the financial management becomes an essential part for the

students of economics, commerce and management. This book provides detailed information about the finance and finance related area with simple language and the concepts are explained with easy examples. This book is also prepared based on the B.Com., B.B.A., B.B.M., M.Com., and M.B.A. syllabus of various universities for the benefits of the students. AUTHORS Contents Preface (v) C HAPTER - 1 INTRODUCTION TO FINANCIAL MANAGEMENT 1–10 Introduction 1 Meaning of Finance 1 Definition of Finance 1 Definition of Business Finance 2 Types of Finance 2 Definition of Financial Management 3 Scope of Financial Management 4 Objectives of Financial Management 5 • Profit maximization 5 • Favourable arguments for profit maximization 6 • Unfavorable arguments for profit maximization 6 • Drawbacks of profit maximization 6 • Wealth maximization 6 • Favourable arguments for wealth maximization 7 • Unfavourable arguments for wealth maximization 7 Approaches to Financial Management 7 • Traditional approach 8 Functions of Finance Manager 8 Importance of Financial Management 9 • Financial planning 9 • Acquisition of funds 9 • Proper use of funds 10 • Financial decision 10 • Improve profitability 10 Contents • Increase the value of the firm 10 • Promoting savings 10 Model Questions 10 C HAPTER - 2 FINANCIAL STATEMENT ANALYSIS 11–24 Introduction 11 Meaning and Definition 11 • Income statement 12 • Position statement 12 • Statement of changes in owners equity 12 • Statement of changes in financial position 12 Types of Financial Statement Analysis 13 Techniques of Financial Statement Analysis 14 • Comparative statement analysis 15 • Comparative balance-sheet analysis 15 • Comparative profit and loss account analysis 16 • Trend analysis 17 • Common size analysis 17 Funds Flow Statement 18 Cash Flow Statement 19 • Difference between funds flow and cash flow statement 19 Ratio Analysis 20 • Liquidity ratio 21 • Activity ratio 21 • Solvency ratio 22 • Profitability ratio 22 Model Questions 24 C HAPTER - 3 SOURCES OF FINANCING 25–39 Introduction 25 • Long-term financial requirements or Fixed capital requirement 25 • Short-term financial requirements or Working capital requirement 25 Sources of Finance 26 Security Finance 28 • Characters of security finance 28 • Types of security finance 28 • Ownership securities 28 Equity Shares 28 • Features of equity shares 28 • Advantages of equity shares 29 • Disadvantages of equity shares 30 Preference Shares 30 • Irredeemable preference shares 31 Contents • Participating...

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