Professional Documents
Culture Documents
Chapter I
Chapter I
INTRODUCTION
Finance is a field that deals with the dynamics of assets and liabilities
over time under conditions of different degree of uncertainty and risk. Finance
can also be defined as the science of money management. Finance aims to
price assets based on the risk level and their expected rate of return.
FINANCIAL MANAGEMENT
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DEFINITION OF FINANCE MANAGEMENT
• Another set of experts believe that finance is all about cash. Since all
business transactions involve cash, directly or indirectly, finance is
concerned with everything done by the business.
• The third and more widely accepted point of view is that financial
management includes the procurement of funds and their effective
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utilization. For example, in the case of a manufacturing company,
financial management must ensure that funds are available for
installing the production plant and machinery. Further, it must ensure
that the profits adequately compensate the costs and risks borne by the
business.
• Further, the business must ensure that it deals with tasks like ensuring
the availability of funds, allocating them, managing them, investing
them, controlling costs, forecasting financial requirements, planning
profits and estimating returns on investment, assessing working
capital, etc.
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• Financial Management
• Financing Decision
• Investment Decision
• Dividend Decision
Investment decisions:
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Financing decisions:
Dividend decisions:
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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 FINANCE
1. Procurement of Funds
The main aim of the finance functions is the provision of adequate finance
to meet requirements of the business. Finance must be provided in time at a
reasonable cost. For this purpose, finance must be procured on favorable terms.
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3. Increasing profitability
IMPORTANCE OF FINANCE
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LIMITATION OF FINANCE
1. Monetary nature
3. Technological Revolution
With the advancement in science and technology for the minute and
detailed break up of all types of data concerning various types of business unit
have become a must for the management in its day today functioning.
4. Incomplete information
The cost of a product can be obtained only when all expense have been
incurred. It is not possible to determine the price fixation requires detailed
information. To fix correct cost of a product, one needs details of fixed and
variable costs and direct and indirect costs.
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6. Evaluation of policies not possible
Finance do not provide data for evaluation of business policies and plans.
They do not make any study of variance in the performance and possible
reasons for it. Finance accounts do not provides any measure to judge the
efficiency of a concern.
9. Personal Bias
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TYPES OF FINANCE
1. Business finance
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total funds committed to total assets and allocating funds to individual assets in
consonance with the overall objectives of the business enterprise.
1. Direct Finance
2. Indirect Finance
The term ‘indirect finance’ refers to the flow of savings from the
savers to the entrepreneurs through intermediary financial institutions such as
investment companies, unit trusts and insurance companies, and so on. Finance
administers economic activities. The scope of finance is vast and determined
by the financial needs of the business enterprise, which have to be identified
before any corporate plan is formulated. This eventually means that financial
data must b obtained and scrutinized. The main purpose behind such scrutiny is
to determine how to maintain financial stability.
3. Public finance
4. Private finance
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corporations. It seeks to analyses the principles and practices of managing
one’s own daily affairs. The finance of non-profit organization deals with the
practices, procedures and problems involved in the financial management of
educational charitable and religious and the like organizations.
5. Corporation finance
6. Direct Finance
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7. Indirect Finance
The term ‘indirect finance’ refers to the flow of savings from the
savers to the entrepreneurs through intermediary financial institutions such as
investment companies, unit trusts and insurance companies, and so on. Finance
administers economic activities. The scope of finance is vast and determined
by the financial needs of the business enterprise, which have to be identified
before any corporate plan is formulated. This eventually means that financial
data must b obtained and scrutinized. The main purpose behind such scrutiny is
to determine how to maintain financial stability.
8. Public finance
9. Private Finance
10.Corporation finance
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accounting problems connected with the distinction between capital and
income, the administrative problem arising out of growth and expansion and,
finally, the financial adjustments which are necessary to bolster up to
rehabilitate a corporation which has run into financial difficulties. The term
‘corporation finance’ includes, apart from the financial environment. The
different strategies of financial planning. It includes problems of public
deposits, inter-company loans and investments, organized markets such as the
stock exchange, the capital market, the money market and the bill market.
Corporation finance also covers capital formation and foreign capital and
collaborations.
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SCOPE OF THE STUDY
The study has focused on financial analysis of Sri Kamatchi Traders. The
study corers the financial analysis of Sri Kamatchi Traders of Kumbakonam
only. The study was conducted with the parameters of long term and short
term solvency to evaluate the financial position of the firm.
RESEARCH METHODOLOGY
The study is based on secondary data that has been collected from annual
reports of the Sri Kamatchi Traders, and from various articles from magazines
and journal, Ratio analysis have been used to analyze the financial statement
of Sri Kamtchi Traders. The study is descriptive in nature.
The study covers the period of five years from 2017-18to 2021-22.
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LIMITATIONS OF THE STUDY
The study has been taken only five years from 2021-22 to 2021-2022.
The study was limited to only Sri Kamatchi Traders at Kumbakonam .
So the result may not be applicable to other firms.
The study is limited to the field of activities of the Sri Kamatchi Traders.
The study does not take into account the areas of finanancial
management such as capital budgeting, dividend policy.
CHAPTER SCHEME
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