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    The Role of Financial Management

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    Kamran Khan Khalil
    The document discusses financial management and its goals. There are three major decisions firms make to create value: 1) investment decisions about what assets to acquire; 2) financing decisions about sources of capital and dividend policy; 3) asset management decisions about efficient use of existing assets. The goal of financial management is maximization of shareholder wealth by increasing share price through profits, earnings per share, and other factors. Corporate governance involves shareholders, boards of directors, and senior management working to achieve this goal.

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    The Role of Financial Management

    Uploaded by

    Kamran Khan Khalil
    38 views5 pages
    The document discusses financial management and its goals. There are three major decisions firms make to create value: 1) investment decisions about what assets to acquire; 2) financing decisions about sources of capital and dividend policy; 3) asset management decisions about efficient use of existing assets. The goal of financial management is maximization of shareholder wealth by increasing share price through profits, earnings per share, and other factors. Corporate governance involves shareholders, boards of directors, and senior management working to achieve this goal.

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    C.1.F.MGT

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    The document discusses financial management and its goals. There are three major decisions firms make to create value: 1) investment decisions about what assets to acquire; 2) financing decisions about sources of capital and dividend policy; 3) asset management decisions about efficient use of existing assets. The goal of financial management is maximization of shareholder wealth by increasing share price through profits, earnings per share, and other factors. Corporate governance involves shareholders, boards of directors, and senior management working to achieve this goal.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    38 views5 pages

    The Role of Financial Management

    Uploaded by

    Kamran Khan Khalil
    The document discusses financial management and its goals. There are three major decisions firms make to create value: 1) investment decisions about what assets to acquire; 2) financing decisions about sources of capital and dividend policy; 3) asset management decisions about efficient use of existing assets. The goal of financial management is maximization of shareholder wealth by increasing share price through profits, earnings per share, and other factors. Corporate governance involves shareholders, boards of directors, and senior management working to achieve this goal.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 5

    The Role of Financial Management

    What is Financial Management? Financial management Concerns the acquisition, financing, and management of assets with some overall goal in mind. There are three major decisions of firms when its comes in value creation
    .

    Chapter 1

    Investment Decisions
    According to the firm size they take decision of investment. What specific assets should be acquired,

    2. Financing Decisions
    From where will take financing, What is the best financing mix. To set the best dividend policy (e.g., dividend-payout ratio)?

    3. Asset Management Decisions


    To manage the existing asset efficiently, Financial Manager has varying degrees of operating responsibility over assets. Good command over 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. Strengths of Shareholder Wealth Maximization Takes account of: current and future profits and EPS; the timing, EPS duration, and risk of profits and EPS; dividend policy; and all other EPS policy relevant factors. Thus, share price serves as a barometer for business performance.

    The Modern Corporation: There exists a SEPARATION between owners and managers. Role of Management: An agent is an individual authorized by another person, called the principal, to act in the latters behalf. Agency Theory: It is a branch of economics relating to the behavior of principals and their agents. Agency Theory Incentives include stock options, perquisites, and bonuses. bonuses Social Responsibility: Wealth maximization does not preclude the firm from being socially responsible. 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.

    Corporate Governance
    Represents the system by which corporations are managed and controlled. Includes shareholders, board of directors, and senior management. Then shareholder wealth maximization remains the appropriate goal in governing the firm. Board of Directors Typical responsibilities: Set company-wide policy; Advise the CEO and other senior executives; Hire, fire, and set the compensation of the CEO;

    Review and approve strategy, significant investments, and acquisitions; and Oversee operating plans, capital budgets, and financial reports to common shareholders. CEO/Chairman roles commonly same person in US, but separate in Britain (US moving this direction).

    QUI

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