Finance Made Easy
Session-1
Introduction to
Finance – By Rahul Jain
“Fun with Finance will help in making
us Fearless”
Apna Sapna Money-Money
I. M. Pandey, Financial Management,
9th ed., Vikas.
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Welcome to the course which
Will improve your confidence
Will help in understanding finance in an easy
way
Will make learning finance simple and fun
Will challenge you and make you think out of
the box.
Will help in executing your business idea
COURSE GUIDELINES
Introduction and Basics of Financial Management
Sources of funds
Capital budgeting & structure
Marginal cost analysis
Ratio analysis
Budgeting & Financial Planning
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Aim of the Module
Identify different sources of raising funds
for an enterprise and methods of
deploying them
understand how capital structure is
planned and executed
To Know about the viability of project.
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Our Strategy for achieving these
Objectives?
Concepts, Cases and Class Discussion
Punctuality, Participation and Preparation
Judgment challenge
Learning to communicate ideas
Learning from each other
Learning through discovery
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What is “Good”
Participation?
Quality, not quantity.
Analyzing and discussing course
material.
Questioning the analysis of others.
Seeking clarification.
Summarizing / synthesizing.
Adherence to guidelines for
professional conduct.
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Learning objectives:
What is financial management?
Difference between financial management
and financial accounting
The goals of financial management !
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We all love money, but Are we passionate
about what we are doing to earn money ??
Lets unlearn, go beyond our fears
Fun with Finance will help in making us
Fearless
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Business Activities
Production
Marketing
Finance
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Meaning
Financial management is a systematic
process that provides the necessary
financial information to help a business
produce and distribute goods and services
in a way that will maximize wealth.
It also provides feedback about how well
the organization is doing.
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Manage Income & Expenses
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Having fun with resources ~
Optimizing
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Finance Functions
Bollywood: To the next level
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Investing- Creating Win-Win
Opportunity
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Finance Functions
Investment or Long Term Asset Mix
Decision
Financing or Capital Mix Decision
Dividend or Profit Allocation Decision
Liquidity or Short Term Asset Mix
Decision
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Financial accounting and Financial
Management
Financial accounting gives the financial
status of the company to people outside
the company. It is recording and reporting
the activities and events that lead to cash
inflow and outflow.
Financial management means efficiently
managing the various resources of the
company.
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Finance Goals
All I care is about making profits !
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Financial Goals
Profit maximization (profit after tax)
Shareholder’s Wealth Maximization
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Profit Maximization
Maximizing the Rupee Income of Firm
– Resources are efficiently utilized
– Appropriate measure of firm performance
– Serves interest of society also
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Objections to Profit
Maximization
It is Vague
It Ignores the Timing of Returns
It Ignores Risk
In new business environment profit
maximization is regarded as
– Inappropriate and Immoral.
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Shareholders’ Wealth
Maximization
Maximizes the cash flow.
Accounts for the timing and risk of the
expected benefits.
Fundamental objective—maximize the
market value of the firm’s shares.
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Risk-return Trade-off
Risk and expected return move in
tandem; the greater the risk, the greater
the expected return.
Financial decisions of the firm are
guided by the risk-return trade-off.
The return and risk relationship:
Return = Risk-free rate + Risk premium
Risk-free rate is a compensation for
time and risk premium for risk.
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Managers Versus
Shareholders’ Goals
A company has stakeholders such as employees, debtholders, consumers, suppliers, government and society.
Managers may perceive their role as reconciling conflicting
objectives of stakeholders. This stakeholders’ view of
managers’ role may compromise with the objective of SWM.
Managers may pursue their own personal goals at the cost of
shareholders, or may play safe and create satisfactory wealth
for shareholders than the maximum.
Managers may avoid taking high investment and financing
risks that may otherwise be needed to maximize
shareholders’ wealth. Such “satisfying” behaviour of
managers will frustrate the objective of SWM as a normative
guide.
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Financial Goals and Firm’s
Mission and Objectives
Firms’ primary objective is maximizing the welfare of
owners, but, in operational terms, they focus on the
satisfaction of its customers through the production of
goods and services needed by them
Firms state their vision, mission and values in broad
terms
Wealth maximization is more appropriately a decision
criterion, rather than an objective or a goal.
Goals or objectives are missions or basic purposes of a
firm’s existence
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Financial Goals and Firm’s
Mission and Objectives
The shareholders’ wealth maximization is
the second-level criterion ensuring that
the decision meets the minimum standard
of the economic performance.
In the final decision-making, the
judgement of management plays the
crucial role. The wealth maximization
criterion would simply indicate whether
an action is economically viable or not.
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Lets get personal
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Interview Exercise
Meet Owner/Manager of an Organization:
Find following:
1) About the Organization and its USP.
2) Important financial decisions that his
organization is taking.
3) Challenges faced.
4) Sources of Revenues and Top three
costs.
5) Future Plans of Expansion.
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Learning Tools
Website
http://bizwizlearning.com/programs/course_detail/fi
nance-made-easy
Phone: 9811228852
Email: rahulkjain16@gmail.com
Text Book:
Financial Management , I.M. Pandey, Vikas
Publications
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Readings
• Bollywood: To the next level
http://www.ft.com/cms/s/0/735cc752-00c411e1-859000144feabdc0.html#axzz3gkoy74Lo
• How Bollywood makes money
http://www.rediff.com/money/2006/may/27sp
ec1.htm
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• Zara becomes the first apparel brand in India to cross
$100-million sales mark
Read more at:
http://economictimes.indiatimes.com/articleshow/480116
26.cms?utm_source=contentofinterest&utm_medium=te
xt&utm_campaign=cppst
• http://economictimes.indiatimes.com/industry/consproducts/garments-/-textiles/zara-becomes-the-firstapparel-brand-in-india-to-cross-100-million-salesmark/articleshow/48011626.cms
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Assignment
Prepare an individual file having :
a) Key learnings of Class-1
b) Summary of any Business News
c) Interview
Email your work-rahulkjain16@gmail.com
Read Chapter 1 of the Book. (I.M. Pandey)
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Download Simulation
Go to the link given below:-
SimVenture link:
https://www.dropbox.com/sh/ngtoz9vwbbpahcm/
AAD6FI3DBbahIY3KHyFIVTKAa
Experience taking financial decisions
References
Pandey, I.M. ( Financial Management)
www.freeimages.com
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