FINUMANU

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Major Areas of Finance

Financial Management

Financial Institution and Market

Investments

Financial Management

also called Corporate Finance or Business Finance.

Financial Institution and Market

deals with banks and other firms that specialize in bringing the suppliers of funds together with the users of funds.

Investments

deals with financial transactions from the viewpoint of investors.

Finance

a branch of study concerned with the allocation, procurement and efficient management of funds (money) to maximize profit, increase the firm’s value and fulfill its

social responsibility

Security analysis

deals with finding the proper values of individual securities (i.e., stocks and bonds)

Portfolio theory

deals with the best way to structure portfolios, or “baskets,” of stocks and bonds.

Market analysis

deals with the issue of whether stock and bond markets at any given time are “too high,” “too low,” or “about right.”

Public Finance

The government handles large sums of money, which are received from many sources and must be utilized in accordance with detailed policies and

procedure.

Securities and Investment Analysis

The investment analysis deals with purchasing

stocks, bonds, and other securities and developing techniques to help investor reduce risk and increase the return from these investments.

International Finance

money crosses international boundaries, individuals, businesses, and governments must deal with special kinds of problems.

Institutional Finance

A nation’s economic structure contains a number of financial institutions, such as banks, insurance companies, pension funds, and credit unions

Financial Management

Individual businesses face problems dealing with the acquisition of funds to carry out their activities and determining the optimum methods of employing the funds.

Allocation

referred to as investment decision or capital

budgeting.

Financing Decision

an important decision to that involves identifying

the sources of funds and determining the mixture of debt and equity which is referred to as capital structure

Dividend Decision

the financial manager decides whether the firm

should distribute all profits, or retain them, or distribute a portion and retain the balance.

Marketing

managers seeks the help of finance in terms of evaluating a marketing decision whether if it would help increase sales and

contribute to the firm’s profit.

Production

seeks the help of finance in terms of evaluating an

investment in plant, equipment or machineries, re engineering a process, procuring materials and

adding manpower.

Management

Finance helps run the firm effectively and efficiently. Management would primarily consider their available finances and seek financial advices in every decision they’re making.

Economic

Finance would help with how people, businesses, and governments acquire funds and

use them efficiently.

Accounting

Finance uses this information to make decision and

address problems

Steward

Has control over assets of the organization with meeting all compliance standards to mitigate business risks involved in the process.

Operator

Create a strategic framework to monitor the efficiency of finance process which in turn will drive cost effectiveness factor across the organization.

Strategist

Acting as strategic advisor to align the organizational goals in tandem with achieving the operational realities by means of measuring and analyzing organization performance with interpretation of finance information in the organization.

Catalyst

Acting as change agent to execute and monitor necessary changes to achieve the overall strategic objectives of the organization to support effective

performance of the steward, operators and strategist role.

Investing decisions

known as capital budgeting decisions because it concerns long-term investment of the enterprise.

Financing decisions

primarily concerned with obtaining or sourcing of funds to be used for investing and providing funds for the day-to-day operations of the enterprise.

Managerial decisions

related to the day-to-day operation of the enterprise, financing decisions and other decisions such as how fast should the company grow, should they extend credit to customers, should they increase the

compensation of employees

Forecasting and planning

expected to coordinate with other executives of the firm to lay out plans for the enterprise to achieve its

objectives.

Forecasting and planning

financial manager is expected to coordinate with

other executives of the firm to lay out plans for the enterprise to achieve its objectives.

Major investment and financing decisions.

order for an enterprise to have a rapid growth, it must invest in plant, equipment and production materials.

Coordination and control

financial manager is expected to interact and

coordinate with other executives of the enterprise to ensure that investments are used efficiently and effectively.

Dealing with the financial markets

The financial manager is expected to deal

with the financial markets.

Axiom 1: The Risk-Return Trade-off

This axiom states that a person is not willing to accept a risky project unless he expects an

additional compensation for it.

Axiom 2: The Time Value of Money

the worth of the currency today is worth more that the value of the currency in the future

Axiom 3: Cash – Not Profits – Is King

This axiom concerns the measurement of creating value or wealth.

Axiom 4: Incremental Cash Flows

This axiom is used in making decisions in accepting or rejecting a project or investment proposals.

Axiom 5: The Curse of Competitive Markets

The primary role of a financial manager is to create wealth. Thus, emphasis should be given on estimating cash flows, identifying investment that earns, and valuing assets.

Axiom 6: Efficient Capital Markets

The Markets are Quick and the Prices are Right

Axiom 7: The Agency Problem

Managers Won’t Work for the Owners Unless It’s in their Best Interest

Axiom 8: Taxes Bias Business Decisions

to properly evaluate a project to be implemented or

rejected, it should consider the after-tax incremental cash flows.

Axiom 9: All Risk is Not Equal

Some Risk Can be Diversified Away and Some Cannot

Axiom 10: Ethical Behavior is Doing the Right Thing, and Ethical Dilemmas are Everywhere in Finance

Every person has its own set of values which is the basis of the judgment whether the action is ethical or not.