Professional Documents
Culture Documents
THE WORLD OF
FINANCE
1
MEANING
Men, Money, Machines, Materials, Methods, Minutes
and Management, are the 7 Ms of management,
4
Financial Management is concerned with three activities:
(i) Anticipating financial needs, which means estimation of
funds required for investment in fixed and current assets
or long-term and short-term assets.
4. Increase Profitability
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FORMS OF BUSINESS OWNERSHIP
1. Sole Proprietorship
2. Partnership
Limited Liability Partnership
3. Co-operative Society
4. The Company Form of Business Ownership
5. Government Company
8
GOALS OF FINANCIAL MANAGEMENT
Profit maximization
Shareholders Wealth Maximization
9
AGENCY PROBLEM
In company (public ltd) form of business organization,
shareholders (equity) are the owners of the company. They
may be in crores and they spread out through the country,
(or some cases through the world). Due to this they cannot
control or manage the company. They elect board of
directors (BoDs) as their representative or agent and
assign the responsibility to the management.
Once BoDs are elected the actual power of shareholders is
restricted, except in certain companies where the
shareholders are also the directors. If they want to know
the future prospects of their company they can collect from
the annual report, accounts, stock brokers, journals, and
daily newspapers. In this circumstances will the (BoDs)
management act in the interest of the shareholders or they
may try to achieve their personal goals at the cost of the
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shareholders.
HOW TO OVERCOME AGENCY
PROBLEM
Connecting pay to the profit earned
Rewarding managers with shares
Threat of firing
Threat of takeover
11
INTRODUCTION TO FINANCIAL
SYSTEM
13
STRUCTURE OF FINANCIAL SYSTEM
14
FINANCIAL INSTITUTIONS
Financial institutions are the business
organization that mobilize saving & depositories
of savings.