The Role of Financial Management

?What is Financial Management

Concerns the acquisition, financing, and management
of assets with some overall goal in mind

Dividend-payout ratio: annual cash dividend

.divining by earning
the ratio indicate the percentage earning that's paid >>
<<to shareholder

:Financial decision
:include all of the
.best type of financing -1
.best financing mix -2
dividend policy -3
fund's by physically -4
greater emphasis on the current assets than fixed ***
assets management

?What's the goal of the firm

Maximization of the shareholder wealth

?When valu creation occurs

..In cace maximize share price for current shareholder

:Corporate

social responsibility

a business outlooks that knowledge's responsibilities to

.stakeholder and environment

:Sustainability
meeting the need of present without compromising the
.ability of future generation to meet their own need

:Shortcoming of alternative perspectives

:Profit maximization-

:Maximization earning firm after tax

:Problem

.could increase current profit while harming firm -1

ignores changes in the risk -2

.level of the firm

-:Earnings per share maximization

Maximization earnings after taxes divided by shares
:outsiding
:Problem

dont specify time or duration for -1

.expected return

.ignores changes in the risk level of the firm -2

.calls for a zero payout dividend policy -3

Strengths of shareholder wealth

:maximization
take in account current and future profits and EPS; the time, and duration, and risk of profit and EPS
.dividend policy; and all other relevant factors
thus share price serves as barometer for business .performance

:The modern corporation

shareholder -1
management -2
There separation between owners and
"''managers

Management>> agent ; "is an individual

authorized by another person called principal ; to
"act latter's behalf
incentive include

stock option -1 perquisites -2 bonuses -3 -

Corporate governanc
Represent the system by which corporations are
"."controlled and managed

:Includes
shareholder -1
board of directors -2
senior management -3
Shareholder wealth maximization >> goal the firm **

Organization of the financial management

:function
Bord of directors
President
EVP marketing

2- EVP finance-CFO
operation

treasurer
capital budgeting
cash management
credit management
dividend disbursement
financial analysis and
planning
pension management

3-EVP -1

controller
preparing financial
statement
cost accounting
internal control
government reporting
data processing
general ledger

insurance/risk
management
tax analysis and planning
mergers and acquisition
analysis
investor relation
commercial banking and
investment banking
relationship

cost management
preparing budgets
preparing forecasts
Cost management