Topic 1

67問 • 1年前

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Management – utilizing scarce resources of the organization to ______________ attainment of the organizations goals and objectives.-The process of ____________ and _____________ an environment in which the individuals, working together in groups, ____________ and ______________ accomplish selected aims and targeted goals.

maximizing, designing, maintaining, efficiently, effectively

The resources or Ms of management:

Men, Money, Materials, Methods, Machine, Market, Moment, Media

utilizing scarce resources of the organization to maximize attainment of the organizations goals and objectives.

Management

The process of designing and maintaining an environment in which the individuals, working together in groups, efficiently and effectively, accomplish selected aims and targeted goals.

Management

____________ is an art and science of managing money.

Finance

It is the lifeblood of business organization.

Finance

___________________ is the planning, directing, monitoring, organizing, and controlling of the monetary resources of an organization.

Financial Management

It is the management of the finances of a business/ organization in order to achieve financial objectives.

Financial Management

_____________ is an ______ and ____________ of managing money. It is the lifeblood of business organization. Financial management is the ____________, ____________, ____________, ___________, and _____________ of the monetary resources of an organization. It is the management of the finances of a business/ organization in order to achieve ___________ objectives.

Finance, art, science, planning, directing, monitoring, organizing, controling, financial

The scope of financial management involves in the three critical decisions, namely:

1. Investment Decisions, 2. Financing Decisions, 3. Dividend Decisions

managers need to decide the amount of investment available out of the existing finance, on a long –term and short-term basis.

Investing decisions

managers also make decisions pertaining to raising finance from long – term sources and short-term sources.

Financing Decisions

these involve decisions related to the portion of profits that will be distributed as dividends. Shareholders always demand a higher dividend, while management would want to retain profits for business needs. Hence this is a complex managerial decision.

Dividend Decisions

Dividend decisions – these involve decisions related to the portion of profits that will be distributed as ____________. Shareholders always demand a _________ dividend, while management would want to _________ profits for business needs. Hence this is a complex managerial decision.

dividends, retain

___________ financial management requires the existence of some objective or goal, because judgment as to whether or not a _____________ is ____________ must be made in light of some standard.

Efficient, Financial Decision, Efficient

Maximization of the value of the firm (valuation approach) _______________ is _____ the main concern of business but the overall value of the firm thus called ______________. The financial manager should focus on other aspect aside profit like; a. _______ attached to the investment proposal or the company’s operation; b. ______ design as to _______ and _______ the profits will flow into the company c. The ___________ and ______________ of the profits reported by the firm

Profit Maximization, not, Valuation Approach, Risk, Time, When, How, Quality, Reliability

___________ maximization is one of the modern approaches, which involves latest innovations and improvements in the field of the business concern. The term ___________ means shareholder wealth or the ___________ of the persons those who are involved in the business concern. ____________ maximization is also known as value maximization or net present worth maximization. This objective is a ____________ accepted concept in the field of business.

wealth, universally

Wealth maximization is one of the ___________ approaches, which involves latest innovations and improvements in the field of the business concern. The term wealth means ________________ or the wealth of the persons those who are involved in the business concern. Wealth maximization is also known as _______________ or _________________This objective is a universally accepted concept in the field of business.

modern, shareholder wealth, value maximization, net present worth maximization

Favorable Arguments for Wealth Maximization Ø Wealth maximization is __________ to the _________________ because the main aim of the business concern under this concept is to improve the ________ or __________of the shareholders. Ø Wealth maximization considers the comparison of the value to cost associated with the business concern. Total ________ detected from the total ________ incurred for the business operation. It provides extract value of the business concern. Ø Wealth maximization considers both _______ and _______ of the business concern. Ø Wealth maximization provides ___________ allocation of resources. Ø It ensures the economic interest of the society.

superior, profit maximization, value, wealth, value, cost, time, risk, efficient

Unfavorable Arguments for Wealth Maximization Ø Wealth maximization leads to prescriptive idea of the business concern but it may _____ be suitable to ___________ day business activities. Ø Wealth maximization is ___________ it is also _____________, it is the ____________ name ofthe profit maximization. Ø Wealth maximization creates ____________-management controversy. Ø ______________ alone enjoys certain benefits. Ø The ultimate aim of the wealth maximization objectives is to _____________ the ___________. Ø Wealth maximization can be activated only with the help of the profitable position of the business concern

not, present, nothing, profit maximization, indirect, ownership, Management, maximize profit

Main aim of any kind of economic activity is earning __________. A business concern is also functioning mainly for the purpose of earning ________. __________is the measuring techniques to understand the business ____________ of the concern.

Profit, Profit, Profit, Efficiency

_________________ is also the traditional and narrow approach, which aims at, maximizes the profit of the concern.

Profit Maximization

Profit maximization is also the ____________ and __________ approach, which aims at, maximizes the ________ of the concern.

traditional, narrow, profit

Profit maximization following important features. v Profit maximization is also called as ________________. It leads to maximize the business operation for profit maximization. v Ultimate aim of the business concern is earning profit; hence, it considers ______ the possible ways to _____________ the profitability of the concern. v ____________ is the parameter of measuring the _____________ of the business concern. So it shows the entire position of the business concern. v Profit maximization objectives help to __________ the risk of the business.

cashing per share maximization, all, increase, profit, efficiency, reduce

The following important points are in support of the profit maximization objectives of the business concern: Ø Main aim is earning _________ Ø _________ is the parameter of the business operation. Ø _________ reduces risk of the business concern. Ø __________ is the main source of finance. Ø ________________ meets the social needs also

Profit, Profitability

Unfavorable Arguments for Profit Maximization The following important points are against the objectives of profit maximization: Ø Profit maximization leads to __________ workers and consumers. Ø Profit maximization creates ___________ practices such as corrupt practice, unfair trade practice, etc. Ø Profit maximization objectives leads to ______________ among the stakeholders such as customers, suppliers, public shareholders, etc.

exploiting, immoral, inequalities

Drawbacks of Profit Maximization :

It is Vague, It Ignores the time value of money, It ignores risk, Timing, Cash flow, Risk

Profit maximization objective consists of certain drawback/ disadvantage also: v It is vague: In this objective, profit is _____ defined precisely or correctly. It creates some _____________ opinion regarding earning habits of the business concern. v It ignores the time value of money: Profit maximization does ______ consider the time value of money or the net present value of the cash inflow. It leads certain differences between the actual cash inflow and net present cash flow during a particular period. v It ignores risk: Profit maximization does ______ consider risk of the business concern. __________ may be internal or external which will affect the overall operation of the business concern. v Timing. Because the firm can earn a return on funds it receives, the receipt of funds _________ rather than _________ is preferred.

not, unnecessary, not, Risk, sooner, later

Profit maximization objective consists of certain drawback/ disadvantage also: v Cash flow. Profits ________ necessarily result in cash flows available to the ____________ .There is _____ guarantee that the board of directors will ___________ dividends when profits _____________. In addition, the accounting assumptions and techniques that a firm adopts can sometimes allow a firm to show a ____________ profit even when its cash __________ exceed its cash ___________. Furthermore, __________ earnings ________ necessarily translate into a _________ stock price. Only when earnings __________ are accompanied by _________ future cash flows is a higher stock price expected.In this case, the earnings ___________ was accompanied by ________ future cash flows and therefore a lower stock price.

do not, stockholders, no, increase, increase, positive, outflows, inflows, higher , do not, higher, increases, Increased, Increase, lower

Profit maximization objective consists of certain drawback/ disadvantage also: (RISK) Profit maximization also ________ to account for ________—the chance that actual outcomes may differ from those expected. A basic premise in managerial finance is that a tradeoff exists between ___________ (cash flow) and __________.

fails, risk, return, risk

Profit maximization objective consists of certain drawback/ disadvantage also: (RISK) __________ and _________are, in fact, the key determinants of share price, which represents the wealth of the owners in the firm. Cash flow and risk affect share price ____________ : Holding _________ fixed, higher _________ is generally associated with a __________ share price. In contrast, holding __________ fixed, higher ________ tends to result in a _________ share price because the stockholders _______ like _______

Return, Risk, differently, risk, cash flow, higher, cash flow, risk, lower, do not, risk

Profit maximization objective consists of certain drawback/ disadvantage also: (RISK) In general stockholders are ____________ —that is, they must be compensated for bearing risk. In other words, investors expect to earn ____________ returns on riskier investments, and they will accept ____________ returns on relatively safe investments.

risk averse, higher, lower

art or recording, classifying, and summarizing transactions and events, which are, in part at least, of a financial character and interpreting the results thereof.

Accounting

management of money or the money itself

Finance

branch of accounting which deals with the recording of business transactions with the basic purpose of preparing the financial statements.

Financial Accounting

branch of accounting which deals with providing internal users, primarily the managers, with the financial information they need to be able to perform their duties efficiently and effectively and make the necessary decisions to improve operations

Managerial Accounting

branch of management entrusted with managing the financial resources of the firm to attain organizational objectives.

Financial Management

What are the ten principles that form the foundation of financial management? 1. The risk-return trade-off – we _______ take additional risks unless we expect to be compensated with additional return. 2. The time value of money- a peso received _________ is worth ________ than the peso received in the _________ 3. ________, ______ profits, is king- it is cash flows, not profits, which are actually received by the firm and can be reinvested. 4. _____________ cash flows- it is only what changes that counts. 5. The curse of competitive markets. Why it is hard to find exceptionally profitable projects. 6. ___________ capital markets. The markets are quick and the prices are right. 7. The agency problem. ____________ will ______ work for the owners unless it is in their bestinterest. 8. ________ bias business decisions- financial managers should consider the impact of taxes to financial decisions 9. ______ risk is _____ equal. Some risk can be diversified away, and some cannot. 10. Ethical __________ is doing the right thing, and ethical _____________ are everywhere in finance.

won't, today, more, future, cash, not, Incremental, Efficient, Managers, not, Taxes, All, not, behavior, dilemmas

are responsible for the financial health of an organization.

Financial Managers

Financial managers are responsible for the financial health of an organization. They produce financial reports, direct investment activities, and develop strategies and plans for the ________ term financial goals of their organization. Financial managers work in many places, including __________ and _____________ companies.

long, banks, insurance

_______________ increasingly assist executives in making decisions that affect the organization, a task for which they need analytical ability and excellent communication skills.

financial managers

What are the goals of the financial manager? v Acquiring funds from the right sources at the right time v Effective cash management v Effective working capital management v Effective inventory management v Effective investment decisions v Proper asset selection v Proper risk management

Take Note!

What are the activities of a financial manager? 1. Performing Financial Analysis and Planning 2. Making Investment Decisions 3. Making financing decisions 4. Coordinating 5. Trading in Financial Markets 6. Risk Management

Take Note!

Tools of Financial Manager :

1. Financial Making Policy, 2. Financial Planning qnd Budgeting, 3. Financial Analysis

selecting financial goals, developing financial policies,and designing the finance organization.

Financial Making Policy

preparing plans to attain set goals, preparing forecast and budgets, and comparing actual performance with budgets to determine variances, and determine actions needed to correct such variances.

Financial Planning and Budgeting

evaluating results of operation and financial condition, investment options, and other finance related activities.

Financial Analysis

CONTROLLER 1. Planning and control 2. Reporting and interpreting 3. Evaluating and consulting 4. Tax administration 5. Government reporting 6. Protection of the assets 7. Economic appraisal

Take Note!

TREASURER 1. Provision of capital 2. Investors relations 3. Short-term financing 4. Banking and custody 5. Credit and collection 6. Insurance

Take Note!

What are the career opportunities in managerial finance and its position description?

Financial Analyst, Capital Expenditures Manager, Project Finance Manager, Cash Manager, Credit Analyst/Manager, Pension fund Manager, Foreign Exchange Manager

Prepares the firm’s financial plans and budgets. Other duties include financial forecasting, performing financial comparisons, and working closely with accounting.

Financial Analyst

Evaluates and recommends proposed long-term investments. Maybe involved in the financial aspects of implementing approved investments.

Capital Expenditures Manager

Arranges financing for approved long-term investments. Coordinates consultants, investment bankers, and legal counsel

Project Finance Manager

Maintains and controls the firm’s daily cash balances. Frequently manages the firm’s cash collection and disbursement activities and short-term investments and coordinates short-term borrowing and banking relationships.

Cash Manager

Administers the firm’s credit policy by evaluating credit applications, extending credit, and monitoring and collecting accounts receivable.

Credit Analyst/ Manager

Oversees or manages the assets and liabilities of the employees’ pension fund.

Pension Fund Manager

Manages specific foreign operations and the firm’s exposure to fluctuations in exchange rates.

Foreign Exchange Manager

the likelihood that managers may place personal goals ahead of corporate goals

Agency Problem

Two factors that can prevent or minimize agency problems:

Market Forces, Agency Cost

Agency cost- cost borne by the stockholders to prevent or minimize agency problems and to contribute to the maximization of the owner’s wealth. It has four types: 1. 2. 3. 4.

Monitoring Expenditures, Bonding Expenditures, Opportunity Cost, Structuring Expenditure

Compensation plan is divided into two groups namely:

Incentive Plans, Performance Plans

prevents satisfying (rather than share price maximizing) behavior by management. These outlays pay for audits and control procedures that are used to assess and limit managerial behavior to those actions that tend to be in the best interest of the owners.

Monitoring Expenditures

protect against the potential consequences of dishonest acts by managers. Typically, the owner pays a third party bonding company to obtain a fidelity bond. This bond is a contract under which the bondingcompany agrees to reimburse the firm for up to a stated amount if a bonded manager’s dishonest act results in financial loss of the firm

Bonding Expenditures

results from the difficulties that large organizations typically have responding to new opportunities.

Opportunity Cost

most popular, powerful, and expensive agency cost incurred by the firm. They result from structuring managerial compensation to correspond with share price maximization. The objective is to give managers incentives to act in the best interest of the owners and to compensate them for their action.

Structuring Expenditure

tend to tie management compensation to share price. The most popular ________________ is the granting of stock option to management. This is better way to maximize the shareholder’s wealth.

Incentive Plans

it includes performance shares and cash bonuses. ________________ are plans that compensate managers on the basis of proven performance measured by EPS, growth in the EPS, and other ratios of return

Performance Plans

Topic 1

Mikyii · 67問 · 1年前

Topic 1