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    Week No.1

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    Nasir Khattak
    This document provides an introduction to business finance. It discusses that business finance involves planning and controlling a firm's financial resources. It is of interest to both academics and managers. The document then discusses the fields of finance, including financial management, financial markets, and investments. Financial management focuses on managing a business's finances, including financial planning, analysis, risk assessment, and investment decisions. The document also provides an overview of financial markets, including primary and secondary markets, as well as money and capital markets. It distinguishes organized exchanges from over-the-counter markets.

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    Week No.1

    Uploaded by

    Nasir Khattak
    15 views13 pages
    This document provides an introduction to business finance. It discusses that business finance involves planning and controlling a firm's financial resources. It is of interest to both academics and managers. The document then discusses the fields of finance, including financial management, financial markets, and investments. Financial management focuses on managing a business's finances, including financial planning, analysis, risk assessment, and investment decisions. The document also provides an overview of financial markets, including primary and secondary markets, as well as money and capital markets. It distinguishes organized exchanges from over-the-counter markets.

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    This document provides an introduction to business finance. It discusses that business finance involves planning and controlling a firm's financial resources. It is of interest to both academics and managers. The document then discusses the fields of finance, including financial management, financial markets, and investments. Financial management focuses on managing a business's finances, including financial planning, analysis, risk assessment, and investment decisions. The document also provides an overview of financial markets, including primary and secondary markets, as well as money and capital markets. It distinguishes organized exchanges from over-the-counter markets.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    15 views13 pages

    Week No.1

    Uploaded by

    Nasir Khattak
    This document provides an introduction to business finance. It discusses that business finance involves planning and controlling a firm's financial resources. It is of interest to both academics and managers. The document then discusses the fields of finance, including financial management, financial markets, and investments. Financial management focuses on managing a business's finances, including financial planning, analysis, risk assessment, and investment decisions. The document also provides an overview of financial markets, including primary and secondary markets, as well as money and capital markets. It distinguishes organized exchanges from over-the-counter markets.

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    BUSINESS

    BUSINESS FINANCE
    FINANCE
    BUSINESS FINANCE WEEK 1
    INTRODUCTION
    • Is that managerial activity which is concern with the
    planning and controlling of the firm financial resources.
    • It is an immense interest to both academics and
    practicing managers.
    • Great interest for academicians because the subject is
    still developing, and there are still certain areas where
    controversies exist for which no solutions have been
    reached as yet.
    • Practicing managers are interested in this subject
    because among the most crucial decisions of the firm are
    those which relate to finance, and an understanding of
    the theory of financial management provides them with
    conceptual and analytical insights to make those decision
    skillfully.
    Field of Finance
    • It is important to business people
    • Financial decisions about how to raise,
    spend and allocate money can affect every
    aspect of a business from personnel to
    products.
    • Finance also offers career opportunities in
    three main areas, financial Management,
    Financial Markets and institutions, and
    investments.
    • Financial Management focuses on managing
    the finance of a business
    Financial Management

    • Manage the finance of a business firm.


    • Analyze, forecast and plan a firm’s
    finances, assess risk, evaluate and select
    investment, decide where and when to find
    money sources.
    • And how much money to raise, and
    determine how much money to return to
    investors in the business
    Scope of Finance
    • What is finance
    • What are a firm’s financial activities
    • How are they related to the firm’s other
    activities
    • Manufacturing companies produce goods,
    and some provides services to customers.
    They sell their goods or services to earn
    profit.
    • They raise funds to acquire manufacturing
    and other facilities.
    Important activities of business
    firm
    • Production
    • Marketing
    • Finance
    • A firm secures whatever capital it
    needs and employs it (finance
    Activity) in activities which
    generates return on invested capital
    (Production and Marketing Activities)
    Objectives of Financial Management
    • Is to maximize the wealth of the firm’s
    owners by adding value.
    • It is not to maximize profits.
    • The value of a firm is measured by the price
    investors are willing to pay to own the firm.
    • For businesses that sell stock to the general
    public, stock price indicates the firm’s value
    because shares of stock are units of
    ownership.
    • So the basic financial goal of such firm is to
    maximize the price of the firm’s stock.
    Financial Markets

    • Financial system allows surplus


    economics units to trade with deficit
    economic units.
    • The trades are carried out in the
    financial markets.
    • Surplus economics units
    • Deficit economics units
    Surplus economic units

    • Economics units generate more


    income than they spend, and have
    funds left over.
    Deficit Economic Units
    • Economics units generate less income than
    they spend, and need to acquire additional
    funds in order to sustain their operations.
    Primary Market
    • When a security is created and sold for the
    first time in the financial marketplace, this
    transaction takes place in the primary market.

    Secondary Market
    • Once a security has been issued, it may be traded
    from one investor to another.
    • The secondary market is where previously issued
    securities or “used” securities are traded among
    investors.
    Money Market
    • Short term securities (a maturity of one
    year or less) are traded in the money
    market. Networks of dealers operate in
    this market.
    • They use phone computer to make trades
    rapidly among themselves and with the
    issuing organizations.
    • Securities traded in money market include
    T-bill, Negotiable Certificates of Deposit,
    Commercial Papers, and Short Term Debt
    instruments.
    Capital Market
    • Long term securities (maturities over one year)
    trade in capital market.
    • Federal, state, and local governments, as well
    as large corporations, raise long term funds in
    the capital market.
    • Firm invest from capital market securities in
    long term assets like buildings, production
    equipment, and so on.
    • Initial offerings of securities in the capital
    market are usually large deals put together by
    investment bankers, although after the original
    issue, the securities may be traded quickly and
    easily among investors
    Organized Markets
    • Which have physical location e.g. Stock Exchange

    Over the Counter (OTC) Market


    • OTC Market has no fixed location or, it is
    everywhere, OTC is a network of dealers around
    the world who maintain inventories of securities
    for sale.
    • E.g. A person wanted to buy a security that is
    traded OTC.
    • Some Dealers in the OTC Market are connected
    through a computer network call NASDAQ (The
    National Association of Securities Dealers
    Automated Quote System).

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