FINANCIAL MANAGEMENT V
(FMG108G)
MODULE OVERVIEW & INTRODUCTION TO FINANCIAL
MANAGEMENT
Overview of the course
Broaden your
understanding of finance
This will be done by
covering principles of
financial management
The overview and the
bigger picture of the
business is dealt with
How the finance word
operates
Introduction to the
financial management
topics:
• Financing decisions
• Operating decisions
• Investing decisions
Link to other
subjects/modules
Financial Management relies on other
disciplines such as economics and
accounting. Therefore, some of the
aspects of topics covered will be
assumed knowledge. Principles such as
risk, return and the time value of
money underpin the Financing and
Investing Decisions that Financial
Managers should make daily while trying
to create sustainable value. As such,
these although learnt in other modules
will be important for this module.
Course Outcome
After completion of this module, a learner will be able to apply the principles of financial management
in a business context as a Financial Manager.
Assessment
One written exam at the end of
the year together with
Four (4) tests, a business
case(presentation), and one
are the major assessment for
this module. A minimum of
40% must be achieved for a
learner to be able to sit for the
exam at the end of the year.
TOPICS
Refer to study guide.
UNIT 1: Introduction to Financial Management (The business bigger picture)
UNIT 2: Sources of Finance, Cost of Capital, Capital Structure
Unit 3: Valuations
Unit 4: Capital budgeting
Unit 5: Leasing
Unit 6: Working Capital and Current Asset Management
Unit 7: Costing
Unit 8: Budgeting
Unit 9: Transfer pricing
Unit 10: Pricing decisions
Fundamental objective of Financial Management
• Maximise value of the firm
• Maximising shareholder wealth (share price)
• Does not have to be in conflict with ethics
• Impact of decisions to stakehoders
The role of a financial manager
• In most companies the role of a financial manager will be
assumed by the CFO
• The first of these is to pursue wealth-creating investment
opportunities, and the second is to find funds to finance the
investments.
BUSINESS :The bigger picture
The main goal of any organisation should be to create value – it is simply what you define as value that differs.
How they create value is also similar, but the emphasis may be different.
What is to create value?
Inputs<Outputs
Use 6 Capitals for to measure value creation as per King V
Reporting on value creation > As included in the Integrated report
Class research
Choose a company and find out how do they create value?
The model
3. Using this productive
capacity requires operating
decision making. It requires
that we establish a value chain;
which results in
incurring/generating:
1. Any organisation is formed through the
raising of finance, both Equity and Long
Term Debt; what you may generically call
making financing decisions.
2. Finance obtained is used to invest in Fixed
Assets and Net Working Capital. This action
would be generically referred to as making
investing decisions. The various types of
assets in which an organisation invests will
depend on the strategy of the organisation,
but most organisations need some form of
assets to create productive capacity
•a) Fixed Costs (costs that do not vary
with productive output) to
support/create capacity;
•b) Variable Costs incurred in
producing the goods or services
(costs that do vary with productive
output);
•c) Revenue through the sale of goods
or services at some price (i.e. revenue
should have both a volume and price
aspect); and
•d) Net Cash Flow through the
collection of the revenue and
payment for the costs incurred – i.e.
can we turn the profit into cash.
4. The cash generated
from operations can
either be paid out to our
original investors through
a dividend (or
distribution) decision,
or returned back into the
business to support the
purchase of further
assets.
Where does this topic fit into the basic
business model?
What is the point of this topic?
ASK YOURSELF
How does this assist us in creating
value for the business?
How does this topic relate to other
topics?
Agency relationship
• Managers act as agents
• Managers should maximise shareholder wealth
Examples where managers don’t act in the interest of shareholders
The role of Auditors
Class discussion