Basics Of Financial Management'

Financial Management

Module 13 - Basics of financial management

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Financial Management is the decision level responsibility for funds generation, funds allocation, capital structuring and profit supervision. management of the investment aspect of the organization , management of the capital structure (equity + long term debt) and its captal operations.

Module 13 - Basics of financial management

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Finance activities Keeping accounting records Budgeting / administering budget Preparing financial statements regularly Interpreting / analyzing financial information Determining funding needs of the company and the corresponding sources of funds Controlling the utilization (collection and disbursement) of funds Making decisions affecting the future financial condition of the firm Module 13 - Basics of financial management

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Types of records Cash records Receipts and payment records Accounts receivable record  Accounts payable record 

Depreciation records Tax records Payroll records Special asset records Module 13 - Basics of financial management

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Types of budgets Sales budget Merchandising budget Advertising budget Cash budget Capital budget Income statement budget

Module 13 - Basics of financial management

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Common financial statements Balance sheet – description of the organization in terms of its assets, liabilities, and net worth Income statement – summary of the organization’s financial performance over a given interval of time Statement of cash flow – summary of an organization’s financial performance that shows where cash or funds came from during the year and where they were applied Budget – formal quantitative statement of resources allocated for planned activities over stipulated periods of time Module 13 - Basics of financial management

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Financial Planning Ascertaining the needs and capabilities of the enterprise through a projection of the needs for and availability of funds over the short-term (cash flow, operating budgets) and the long term (capital budget).

Module 13 - Basics of financial management

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Funding needs Operating requirements – funds needed for the day-today activities of the business (e.g. purchase of raw materials) Investment requirements – funds needed to enhance the long-term productivity of the business (e.g. new equipment and technology) Module 13 - Basics of financial management

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Types of business activities Operating activities – activities done by the business on a day-to-day basis Investing activities – activities done to increase the long-term productivity of the business Financing activities – activities meant to ensure the availability of funds for the operations of the business Module 13 - Basics of financial management

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Operating activities Purchasing raw materials Storing raw materials Buying supplies needed for the business Producing the product Selling goods or services Collecting from customers Depositing and withdrawing money from the bank Module 13 - Basics of financial management

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Investing activities Buying land Setting up a plant or shop Purchasing machines or equipment Upgrading equipment Buying hardware and software

Module 13 - Basics of financial management

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Financing activities Buying raw materials on credit Buying equipment on installment basis Borrowing money from the bank or from other financial institutions Discounting notes or accounts receivables Issuing shares of stock Keeping the earnings of the business Module 13 - Basics of financial management

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Analysis of Financial Performance Done for internal purposes so that management and stakeholders would know the financial outcome of operations and the financial condition of the organization Financial statement analysis – examining the financial statements of a company to determine its financial condition

Module 13 - Basics of financial management

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