Green University of Bangladesh
Green Business School
Mid Term Assessment (Assignment), Fall Semester-2021 [213]
Course Code: BUS 203; Course Title: Financial Management
Mostafijur Rahman - 181006044
Ans to the question number 1
Describe the answer using the proper definition, essential objectives
of a financial manager, and relate with the organization's goal using
suitable examples.
Ans: Financial Management means planning, organizing, directing and
controlling the financial activities such as procurement and utilization
of funds of the enterprise. It means applying general management
principles to financial resources of the enterprise.
The objectives of financial management are given below:
1. Profit maximization
Main aim of any kind of economic activity is earning profit. A business
concern is also functioning mainly for the purpose of earning profit.
Profit is the measuring techniques to understand the business
efficiency of the concern.
The finance manager tries to earn maximum profits for the company in
the short-term and the long-term. He cannot guarantee profits in the
long term because of business uncertainties. However, a company can
earn maximum profits even in the long-term, if:
The Finance manager takes proper financial decisions
He uses the finance of the company properly
2. Wealth maximization
Wealth maximization (shareholders’ value maximization) is also a main
objective of financial management. Wealth maximization means to
earn maximum wealth for the shareholders. So, the finance manager
tries to give a maximum dividend to the shareholders. He also tries to
increase the market value of the shares. The market value of the shares
is directly related to the performance of the company. Better the
performance, higher is the market value of shares and vice-versa. So,
the finance manager must try to maximize shareholder’s value
3. Proper estimation of total financial requirements
Proper estimation of total financial requirements is a very important
objective of financial management. The finance manager must estimate
the total financial requirements of the company. He must find out how
much finance is required to start and run the company. He must find
out the fixed capital and working capital requirements of the company.
His estimation must be correct. If not, there will be shortage or surplus
of finance. Estimating the financial requirements is a very difficult job.
The finance manager must consider many factors, such as the type of
technology used by company, number of employees employed, scale of
operations, legal requirements, etc.
4. Proper mobilization
Mobilization (collection) of finance is an important objective of financial
management. After estimating the financial requirements, the finance
manager must decide about the sources of finance. He can collect
finance from many sources such as shares, debentures, bank loans, etc.
There must be a proper balance between owned finance and borrowed
finance. The company must borrow money at a low rate of interest.
5. Proper utilization of finance
Proper utilization of finance is an important objective of financial
management. The finance manager must make optimum utilization of
finance. He must use the finance profitable. He must not waste the
finance of the company. He must not invest the company’s finance in
unprofitable projects. He must not block the company’s finance in
inventories. He must have a short credit period.
6. Maintaining proper cash flow
Maintaining proper cash flow is a short-term objective of financial
management. The company must have a proper cash flow to pay the
day-to-day expenses such as purchase of raw materials, payment of
wages and salaries, rent, electricity bills, etc. If the company has a good
cash flow, it can take advantage of many opportunities such as getting
cash discounts on purchases, large-scale purchasing, giving credit to
customers, etc. A healthy cash flow improves the chances of survival
and success of the company.
Describe the answer using proper definition, essential objectives of a
financial manager, and relate with the organization's goal.
Ans:
Financial managers maintain a company's financial health. This might
involve managing the budgets and creating profitability for a young
company or strategic risk assessment and investment evaluation for an
established company. The goals of financial management remain the
same, however, no matter the size of the company. In this article, we
discuss financial management goals as well as the tasks and
components involved in achieving them.
Common goals of financial management
The goal of a financial manager is to keep the company or organization
solvent and successful. There are several elements to this goal:
Maximize current value
The financial manager or managerial team works to maintain the
highest value possible for the company's assets. In a publicly owned
company, this means maintaining the highest possible value per stock
in the company.
Maintain growth
The financial manager aims to increase the company's value over time.
They help to achieve this by producing and implementing financial
plans.
Maximize profit
Maximizing profit may involve locating opportunities to invest, acquire
a competitor or develop new products. This can involve
communications with other divisions such as marketing or research and
development to create efficient strategies.
Minimize cost
As they monitor spending, a financial manager looks for opportunities
to minimize the costs of doing business, such as overhead,
manufacturing and distribution costs. They then communicate these
potential changes to the respective management teams.
Describe the answer using the proper definition, essential objectives
of a financial manager.
Ans: Financial Management means planning, organizing, directing and
controlling the financial activities such as procurement and utilization
of funds of the enterprise. It means applying general management
principles to financial resources of the enterprise.
Objectives of Financial Management
The financial management is generally concerned with procurement,
allocation and control of financial resources of a concern. The
objectives can be1. To ensure regular and adequate supply of funds to the concern.
2. To ensure adequate returns to the shareholders which will
depend upon the earning capacity, market price of the share,
expectations of the shareholders.
3. To ensure optimum funds utilization. Once the funds are
procured, they should be utilized in maximum possible way at
least cost.
4. To ensure safety on investment, i.e, funds should be invested in
safe ventures so that adequate rate of return can be achieved.
5. 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 Financial Management
1. Estimation of capital requirements: A finance manager has to
make estimation with regards to capital requirements of the
company. This will depend upon expected costs and profits and
future programmes and policies of a concern. Estimations have to
be made in an adequate manner which increases earning capacity
of enterprise.
2. Determination of capital composition: Once the estimation have
been made, the capital structure have to be decided. This involves
short- term and long- term debt equity analysis. This will depend
upon the proportion of equity capital a company is possessing and
additional funds which have to be raised from outside parties.
3. Choice of sources of funds: For additional funds to be procured, a
company has many choices likea. Issue of shares and debentures
b. Loans to be taken from banks and financial institutions
c. Public deposits to be drawn like in form of bonds.
Choice of factor will depend on relative merits and demerits of each
source and period of financing.
4. Investment of funds: The finance manager has to decide to
allocate funds into profitable ventures so that there is safety on
investment and regular returns is possible.
5. Disposal of surplus: The net profits decision have to be made by
the finance manager. This can be done in two ways:
a. Dividend declaration - It includes identifying the rate of
dividends and other benefits like bonus.
6. Management of cash: Finance manager has to make decisions
with regards to cash management. Cash is required for many
purposes like payment of wages and salaries, payment of
electricity and water bills, payment to creditors, meeting current
liabilities, maintenance of enough stock, purchase of raw
materials, etc.
7. Financial controls: The finance manager has not only to plan,
procure and utilize the funds but he also has to exercise control
over finances. This can be done through many techniques like
ratio analysis, financial forecasting, cost and profit control, etc.
Describe the answer by discussing the essential objective of a
financial manager.
Ans:
Financial management is the management of all financial activities that
includes processes such as planning, directing, organizing and
controlling. In other words, it can be defined as the application of
general management principles to financial activities of the enterprise.
The basic objectives of financial management have been highlighted in
the Financial Management Assignment. Some of them are given below:

One of the main objectives of financial management is to
maximize the wealth of shareholders. It is a great approach that
aims at the growth of the organization.

To cut down additional and unnecessary costs for effective
utilization of funds. It will reduce the wastage of funds in useless
assets.

To ensure that sufficient amount of funds is available at the time
of need. It is an important step that must be taken by the
management for sound financial condition of the business.
Functions of Financial Management:
Financial management plays a crucial role in business and has
numerous functions. The various functions of financial
management have been discussed in the Financial Management
Assignment. Some of them are mentioned below: Investment of Funds- It is the task of financial manager to allocate
and invest funds into profitable ventures in order to ensure the
safety of funds in the investment.
Estimation of Capital Requirement- capital requirement is
estimated according to the profits, expected costs and future
policies of a firm. An adequate estimation is necessary for the
growth of the firm.
Management of Cash- financial managers have to make decisions
regarding cash management. The management of cash is required
for many purposes like raw materials, maintenance of stock,
wages and salaries, creditors, bills, etc.
Financial Control- it is an important of financial management. It
can be done through techniques like financial forecasting, ratio
analysis, cost and profit control, etc.
Define the term financial management
Ans: Financial management refers to the strategic planning,
organizing, directing, and controlling of financial undertakings in
an organization or an institute. It also includes applying
management principles to the financial assets of an organization,
while also playing an important part in fiscal management.
Ans to The question number 2
Ans: Motivation is one of three key performance elements. In fact,
research suggests that performance is a function of ability, motivation
and opportunity:
Performance = Function {Ability × Motivation × Opportunity}
Ability refers to a person’s or a team’s ability to perform a task.
Opportunity refers to the timing and situation around the task. For
instance, if a hospital sets out to be known for successful heart
transplants, it must have a team of surgeons that are skilled in
performing transplants (ability), and there must be adequate space and
equipment to perform transplants, as well as patients who need them
(opportunity). Managers have little influence over ability, and they can
only somewhat influence opportunity.
Can managers influence employees to be more productive by
understanding their sources of motivation, or even creating sources of
motivation for their employees? Most researchers agree that the
answer to that is yes. Motivation isn’t a stable state of mind, and what
motivates an employee right now might not be the same a year later.
But researchers don’t necessarily agree on the best way to accomplish
that—and perhaps there is not one best approach.
Motivation is one of the most researched topics in organizational
behavior, because a manager’s ability to influence employee
motivation can directly affect an organization’s bottom line.
Evaluate the concept of conflict of interest with example and discuss
and relate the different motivating factors that may minimize the
conflict.
Ans:
Motivation and Conflict Management
Organizations strive for creative ways to enhance employee motivation
and resolve conflicts with the desire to have employees perform better
within the workplace. To motivate one has to be motivated. Motivation
within the workplace has to be constant and requiring a goal.
Motivation, if not repeated will not last. Therefore, learning to
determine how different organizations apply motivation theories to
motivate employees, analyzing conflict management strategies and
what approaches work best in different organizations will influence the
success of an organization.
Motivation Theories and Organizational Behavior
Motivation is the concept of stimulating or arousing a person to achieve
a goal. Motivation has much to do with desire and ambition, and if they
are absent, motivation is absent too (What is Motivation and How to
Strengthen It, para. 1). Motivation theories are unique to each
organization. Some organizations have come up with motivation
theories such as setting work goals, job performance evaluations, and
fair treatment policies within the work environment to keep employees
motivated. The impact that individuals, groups and structures have on
behavior within organizations is Organizational Behavior. Motivation is
affected by organizational behaviors, which is why different
organizations apply motivation theories to motivate employees
Evaluate the concept of conflict of interest problem with example and
discuss the different motivating factors of the agency problem.
Ans:
Agency problems—also known as principal-agent problems or
asymmetric information-driven conflicts of interest—are inherent in
many corporate structures. This conflict arises when separate parties in
a business relationship, such as a corporation's managers and
shareholders, or principals and agents, have disparate interests.
Principals hire agents to represent the principals' interests. Agents,
working as employees, are assumed and obligated to serve the
principal's best interests. Problems occur when the agent begins
serving different interests, such as the agent's own interests. Thus,
conflict occurs between the interests of principals and agents when
each party has different motivations, or incentives exist that place the
two parties at odds with each other.
Corporations employ several dynamic techniques to circumvent static
issues resulting from agency problems, including monitoring,
contractual incentives, soliciting the aid of third parties, or relying on
other price system mechanisms. The study of agency problems is
ongoing in both corporate and academic circles. Increasingly, contract
design limits are recognized and corporations are turning to different
incentive mechanisms.