The document provides an introduction to business finance, defining finance and describing the primary duties of a financial manager which include financial planning and analysis, investment decisions, financing decisions, and dividend decisions in order to help achieve organizational goals. It also describes the roles of financial institutions and markets in providing various financial instruments and environments for trading securities, commodities, and other financial assets.
The document provides an introduction to business finance, defining finance and describing the primary duties of a financial manager which include financial planning and analysis, investment decisions, financing decisions, and dividend decisions in order to help achieve organizational goals. It also describes the roles of financial institutions and markets in providing various financial instruments and environments for trading securities, commodities, and other financial assets.
The document provides an introduction to business finance, defining finance and describing the primary duties of a financial manager which include financial planning and analysis, investment decisions, financing decisions, and dividend decisions in order to help achieve organizational goals. It also describes the roles of financial institutions and markets in providing various financial instruments and environments for trading securities, commodities, and other financial assets.
Describe the financial manager Lesson Objectives -Describe how the financial manager helps Describe in achieving organizational goals
-Describe the role of financial institutions
Describe and markets. Finance is the study of the art and the science of money management; it is based on the Latin root finis, meaning the end. In managing ours or our firm’s What is money, we consider historical outcomes or “endings,” and we Finance? propose future results as a function of decisions made today. Those outcomes or results are typically portrayed using financial statements. Overview of other disciplines involved in Finance The Primary Duties of the Financial Manager
Whether managing monies for the home,
or for the firm, our duties are met with decisions framed by the same general principles. These principles instruct us in making main types of decisions as we perform those primary duties.
Financial Planning and Analysis
Investment Decisions Financing Decisions Dividend Decisions Financial Planning and Analysis
Gauge company’s financial health
through the use of financial ratios Working with other departments in preparation of their budgets Creation of internal reports for the top management Comparison of historical results against budgets and forecasts. Analyzing differences and how to make improvements. Investment Evaluation of projects in terms of Decisions (also profitability. Which project/proposal will make the most known as profit. Assumptions/Considerations of all risks Capital involved
Budgeting) Since the resources of the company is
limited, it must be carefully studied on where to invest the assets of the company. If in investment, we choose where to put the company’s assets, in financing, we choose/decide how to acquire Financing assets. This is usually through a combination of equity (investment) and Decisions debt. An acceptable ratio of equity to debt is usually determined by industry standards or internal company policies/practices. Should the company gain profits, Finance managers decide whether to: Dividend -distribute all profits to shareholders decisions -retain profit for future investments -distribute part of it Financial Institutions: A financial institution (FI) is a company engaged in the business of dealing with monetary transactions, such as deposits, loans, investments and Financial currency exchange. Financial institutions encompass a broad range of business Environment operations within the financial services sector, including banks, trust companies, insurance companies, and brokerage firms or investment dealers. Financial instruments are assets that can be traded. They can also be seen Financial as packages of capital that may be traded. These assets can be cash, a Environment contractual right to deliver or receive cash or another type of financial (cont.) instrument, or evidence of one's ownership of an entity A financial market is a market in which people trade Financial financial securities, commodities, and other interchangeable items of value at Environment costs and prices that reflect supply and demand. Securities include stocks and (cont.) bonds, and commodities include precious metals or agricultural products. Stock Market The stock market trades shares of ownership of public companies. Each share Financial comes with a price, and investors make money with the stocks when they perform Market well in the market. It is easy to buy stocks. The real challenge is in choosing the right stocks that will earn money for the investor. Bond market The bond market offers opportunities for Financial companies and the government to secure money to finance a project or investment. Market In a bond market, investors buy bonds from a company, and the company returns the amount of the bonds within an agreed period, plus interest. Money Markets Typically the money markets trade in products with highly liquid short-term maturities (of less than one year) and Financial are characterized by a high degree of safety and a relatively low return in Market interest. Individuals may also invest in the money markets by buying short- term certificates of deposit (CDs), municipal notes, or Treasury bills, among other examples How does the Analyzes trends that will support in decision making Finance Evaluates financial health of the organization manager helps Maximizes profitability of investments in achieving for company growth Determines and calculates financial organizational risks