مدیریت مالی Financial Management

 

فشرده از مباحث تدریس شده در صنوف  DBA بخش مالی  ....  

 Fundamentals of Financial Management 

Chapter 1

The Role of Financial Management

Prepared by: Waseem Ullah Khan

Kardan Institute of Higher Studies Kabul Afghanistan

-         What is Financial Management?

-         The Goal of the Firm

-         Organization of the Financial Management Function

What is Financial Management?

Concerns the acquisition, financing, and management of assets with some overall goal in mind.

Investment Decisions

Most important of the three decisions.

-         What is the optimal firm size?

-         What specific assets should be acquired?

-         What assets (if any) should be reduced or eliminated?

Financing Decisions:

Determine how the assets (LHS of balance sheet) will be financed (RHS of balance sheet).

-         What is the best type of financing?

-         What is the best financing mix?

-         What is the best dividend policy?

-         How will the funds be physically acquired?

Asset Management Decisions:

-         How do we manage existing assets efficiently?

-         Financial Manager has varying degrees of operating responsibility over assets.

-         Greater emphasis on current asset management than fixed asset management.

What is the Goal of the Firm?

Maximization of Shareholder Wealth!

Value creation occurs when we maximize the share price for current shareholders.

Shortcomings of Alternative Perspectives

Profit Maximization

-         Maximizing a firm’s earnings after taxes.

Problems

-         Could increase current profits while harming firm (e.g., defer maintenance, issue common stock to buy T-bills, etc.).

-         Ignores changes in the risk level of the firm.

Earnings per Share Maximization

-         Maximizing earnings after taxes divided by shares outstanding.

Problems

-         Does not specify timing or duration of expected returns.

-         Ignores changes in the risk level of the firm.

-         Calls for a zero payout dividend policy.

Strengths of Shareholder Wealth Maximization

-         Takes account of: current and future profits and EPS;  the timing, duration, and risk of profits and EPS; dividend policy; and all other relevant factors.

Thus, share price serves as a barometer for business performance.

The Modern Corporation

Modern Corporation

I - Shareholders 

II - Management 

There exists a SEPARATION between owners and managers.

Role of Management

Management acts as an agent for the owners (shareholders) of the firm.

-         An agent is an individual authorized by another person, called the principal, to act in the latter’s behalf.

Agency Theory

-         Jensen and Meckling developed a theory of the firm based on agency theory.

-         Agency Theory is a branch of economics relating to the behavior of principals and their agents.

-         Principals must provide incentives so that management acts in the principals’ best interests and then monitor results.

-         Incentives include stock options, perquisites, and bonuses.

Social Responsibility

-         Wealth maximization does not preclude the firm from being socially responsible.

-         Assume we view the firm as producing both private and social goods. 

-         Then shareholder wealth maximization remains the appropriate goal in governing the firm.

Organization of the Financial Management Function

Board of Directors

President (Chief Executive Officer)

Vice President Operations

VP of Finance

Vice President Marketing

Organization of the Financial Management Function

VP of Finance

-   Treasurer

Capital Budgeting

Cash Management

Credit Management

Dividend Disbursement

Fin Analysis/Planning

Pension Management

Insurance/Risk Management

Tax Analysis/Planning

-   Controller

Cost Accounting

Cost Management

Data Processing

General Ledger

Government Reporting

Internal Control

Preparing Fin Statements

Preparing Budgets

Preparing Forecasts