gives an over view of financial management

2. Financial management
Maximization of share value
Financial decisions
Investment
decisions
Liquidity
decisions
Financing
decisions
Dividend
decisions
Return Risk
Trade-off

3. Financial management:
Financial Management means the efficient and effective
management of money (funds) in such a manner as to accomplish the objectives of
the organization. It is the specialized functions directly associated with the top
management. The significance of this function is not only seen in the 'Line' but also in
the capacity of 'Staff' in overall administration of a company.
Maximization of share value:
Share holder wealth maximization means maximizing the net
present value of a course of action to share holders. NPV or wealth of a course of
action of the difference between the present value of its benefits and the present
value of its costs. The objective of SMW takes care of the questions of the timing and
risk of the accepted benefits.
Financial decisions:
There are four types of financial decisions which are to be taken
by the financial manager. they are as follows:

4. Investment Decisions: Also know as capital budgeting. The investment decision relates to
the selection of assets in which funds will be invested by a firm. The assets which can be
acquired fall into two broad groups: (I) long-term assets which yield a return over a period
of time in future, (ii) short-term or current assets, defined as those assets which in the
normal course of business are convertible into cash immediately.
Financing Decisions: The second major decision involved in financial management is the
financing decision. The investment decision is broadly concerned with the asset-mix or the
composition of the assets of a firm. The concern of the financing decision is with the
financing-mix or capital structure or leverage.
Dividend Decisions: The third major decision area of financial management is the decision
relating to the dividend policy. The dividend decision should be analyzed in' relation to the
financing decision of a firm. Two alternatives are available in dealing with the profits of a
firm, they can be distributed to the shareholders in the form of dividends or they can be
retained in the business itself.
Liquidity Decisions: Financial manager should manage the liquidity position of his firm.
Current assets should be managed efficiently for safeguarding the firm against the
dangers of liquidity and insolvency. If the firm against the dangers as liquidity and
insolvency . If the firm does not invest sufficient funds in current assets, it may become
liquid.

5. Risk – Return And Trade –Off: financial decisions incur different degree of risk. Risk and
expected return move in tandem; more risk- more return. financial decisions are guided
by risk-return trade-off. The relation between return and risk can be simply expressed as
follows:
Return= Risk-free+ risk premium
Risk-free means default risk from govt. securities where risk above risk-free rate is risk
premium. A financial manager should take decisions to invest in such a way that the risk
and return are balanced. After there is a balance the decisions should be in such a way
that the return.
Conclusion: the role of financial manager is to raise allocate plan maintain the funds i.e,
to take the decisions said above and maintain good relations between all the functional
heads. The growth of an organization depends on these decisions. so a financial manager
should be very careful when taking the decisions.

6. -By Aprameya joshi

7. -By Aprameya joshi