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Scope of Financial Management

Scope of Financial Management
SCOPE OF FINANCIAL #MANAGEMENT Facebook Buys WhatsApp: Boneheaded or Brilliant? This was the title of a  Forbes Article when Mark Zuckerberg acquired Whatsapp for $19 billion dollars, the price that may exceed the GNP of some of those countries. Mark is said to be an unconventional thinker and the WhatsApp acquisition shows Facebook’s determination to follow the road not yet paved. It is a bold move, yet filled with risks along the way. This is one of the finest examples of a big #investment decisions of recent times and the right course of action,  if you measure the number of potential users of the mobile messaging service rather than the cost of acquiring each user and the potential for selling ads to each user today. Financial management is one of the important aspects of overall management, which is directly asscoiated with various functional departments like personnel, marketing and production. Financial management embraces wide area with multidimensional approaches. The following are the important scope of financial management. Some of the major scope of financial management are as follows: 1. Investment Decision 2. Financing Decision 3. Dividend Decision 4. Working #Capital Decision. 1. Investment Decision: The investment decision involves #Risk Evaluation Measurement of #cost of capital and Estimation of expected benefits from a project. #Capital budgeting and liquidity are the other two major components of investment decision. Capital budgeting takes care of the distribution of capital and commitment of funds in permanent assets to harvest revenue in future. Capital budgeting is a very focal decision as it impacts the long-term success and growth of a firm. All the same it is a very tough decision because it encompasses the estimation of costs and benefits which are uncertain and unknown. 2. Financing Decision: Financing decision is related to financing mix or financial structure of the firm. The raising of funds requires decisions regarding Methods and sources of finance relative proportion and choice between alternative sources Time of floatation of #securities, etc. In order to meet its investment needs, a firm can raise funds from various sources. Long Term Sources of Finance: Share Capital or #Equity Shares Preference Capital or #Preference Shares Retained Earnings or Internal Accruals Debenture / Bonds Term Loans from Financial Institutes, Government, and Commercial Banks Venture Funding Asset Securitization International Financing by way of Euro Issue, Foreign Currency Loans, ADR, GDR etc.  #Medium Term Sources of Finance: Preference Capital or Preference Shares Debenture / Bonds Medium Term Loans from Financial Institutes Government, and Commercial Banks Lease Finance Hire Purchase Finance #Short Term Sources of Finance: Trade Credit Short Term Loans like Working Capital Loans from Commercial Banks Fixed Deposits for a period of 1 year or less Advances received from customers Creditors Payables Factoring Services Bill Discounting etc. 3. Dividend Decision: In order to accomplish the goal of wealth maximization, a proper #dividend policy must be established. One feature of dividend policy is to decide whether to distribute all the profits in the form of dividends or to plough back the profit into business. While deciding the optimum dividend payout ratio (proportion of net profits to be paid out to shareholders), the finance manager should consider the following: Investment opportunities available to the firm Plans for expansion and growth, Dividend stability Form of dividends, i.e., cash dividends or stock dividends, etc. 4. Working Capital Decision: Working capital decision is related to the FINANCING in #current assets and #current liabilities. Current assets include cash, receivables, inventory, short-term securities, etc. Current liabilities consist of creditors, bills payable, outstanding expenses, bank overdraft, etc. Current assets are those assets which are convertible into cash within a year. Similarly, current liabilities are those liabilities, which are likely to mature for payment...
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The 15 Characteristics of Effective Entrepreneurs

The 15 Characteristics of Effective Entrepreneurs
 The 15 Characteristics of Effective Entrepreneurs RELATED POSTS: Contributions of Entrepreneurs to the Society How Women Entrepreneurs are Viewed by the Society Entrepreneurship in Developing Economies  ...
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Meaning and Definition of Finance

Meaning and Definition of Finance
Meaning and Definition of Finance Meaning of Finance The science that describes the #management, creation and study of money, #banking, #credit, investments, assets and liabilities. The financial systems include the public, private and government spaces, and the study of finance and financial instruments, which can relate to countless assets and liabilities. Finance is divided into three distinct categories: public finance, corporate finance and personal finance, all three consisting of  many sub-categories. The one word which can easily substitute finance is “#exchange.” Finance is nothing but an exchange of available resources. Finance is not restricted only to the exchange and/or management of money. A barter trading system is also a type of finance. Thus, we can say, Finance is an art of managing various available resources like money, assets, investments, securities, etc. Some Definitions of Finance The concept of finance includes capital, funds, money, and amount. But each word has its unique meaning. Studying and understanding the concept of finance becomes an important part of the business concern. Definition of Business Finance According to the Wheeler, “Business finance is that business activity which concerns with the acquisition and conversation of capital funds in meeting financial needs and overall objectives of a business enterprise”. According to the Guthumann and Dougall, “Business finance can broadly be defined as the activity concerned with planning, raising, controlling, administering of the funds used in the business”. In the words of Parhter and Wert, “Business finance deals primarily with raising, administering and disbursing funds by privately owned business units operating in non-financial fields of industry”. The term finance comes from the Latin “finis” which means end or finish . It is a term whose implications affect both individuals and businesses, organizations and states it has to do with obtaining and using or money management – Ivan Thompson According to Bodie and Merton, finance is the “study how scarce resources are allocated over time”. Corporate Finance Corporate finance is concerned with #budgeting, financial forecasting, cash management, credit administration, #investment analysis and fund procurement of the business concern and the business concern needs to adopt modern technology and application suitable to the global environment. Corporate finance is the area of finance dealing with the sources of funding and the capital structure of corporations and the actions that managers take to increase the value of the firm to the shareholders, as well as the tools and analysis used to allocate financial resources. The financial activities related to running a corporation. A division or department that oversees the financial activities of a company. Corporate finance is primarily concerned with maximizing shareholder value through long-term and short-term financial planning and the implementation of various strategies. Everything from capital investment decisions to investment banking falls under the domain of corporate finance. According to the Encyclopedia of Social Sciences, “Corporation finance deals with the financial problems of corporate enterprises. These problems include the financial aspects of the promotion of new enterprises and their administration during early development, the accounting problems connected with the distinction between capital and income, the administrative questions created by growth and expansion, and finally, the financial adjustments required for the bolstering up or rehabilitation of a corporation which has come into financial difficulties”. The core corporate finance principles can be stated as follows: The Investment Principle: It is better to invest in assets and projects that yield a return greater than the minimum acceptable hurdle rate. The hurdle rate should be higher for riskier projects and should reflect the financing mix used—owners funds (equity) or borrowed money (debt). Returns on projects should be evaluated  based on cash flows generated and the timing of these cash flows; they should also consider both positive...
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Does Your Company Have What it Takes to be a Leader-2

Does Your Company Have What it Takes to be a Leader-2
Does Your Company Have What it takes to be a leader Corporations that are considered leaders in terms of business performance take a common approach to CSR. The blueprint for how corporations can maximize their investments in CSR contain five essential ingredients- Business-based social purpose Clear theory of change Quality and depth of information Concentrated effort, and Partnering with experts.What it Takes to be a Leader-2 1. Business-based social purpose: There have been too many examples of CSR programs that ignore business fundamentals. Leadership-level CSR programs always directly reflect what the business is and what it does. An “innovative CSR initiative” can emphasize the company’s business purpose and flawlessly leverage its operational competencies. The social purpose of a business is aligned with and supports social issues in a way that is consistent with the unique culture and character of the business. Srinivasan Services Trust is a social arm of Sundaram Clayton Limited and TVS Motor company established in 1996 for charitable purposes. The company focuses on improving health, education, women’s empowerment, infrastructure and environment that would bring about changes in the lives of people in a community. 2. Clear theory of change: CSR is becoming indispensable. On the one hand, that’s good news because it proves its business value. On the other hand, it’s getting harder to discriminate one company’s efforts from another’s. CSR leaders develop branded approaches to drive measurable social change. Starbucks Coffee has 8,000 stores, in 34 countries that sell to 30 million customers each week has adopted an unique CSR approach. Their mission is to provide the highest quality coffee in an environment that is consistent worldwide and support the sustainability of their farmers. Starbucks could be considered compliant and even proactive in their responsibilities to stakeholders. They purchase coffee in 20-30 countries per year, as their buying agents spend 240/365 days per year on the road searching for the best coffee farms and developing relationships with customers. It involves mutually agreed upon fair pricing, economic transparency, socially responsible buying, and environmentally friendly expectations. These standards protect the farmer’s business and ensure that Starbucks can support their ethical branding with practices that respect the environment. 3. Quality and depth of information: Merely pin-pointing social priorities for community investment is not adequate. Leadership comes from providing employees, customers and external stakeholders with a significant depth of information about the social issue through authentic research, white papers, videos, stories, social media, and so on. Bill & Melinda Gates Foundation or the Gates Foundation is one of the largest private foundations in the world, founded by Bill and Melinda Gates. It was launched in 2000 and is said to be the largest transparently operated private foundation in the world. Guided by the belief that ‘all lives have equal value’, Bill Gates and his wife  Melinda Gates the co-chairs explain about their work and their commitment in supporting the government in reaching India’s most vulnerable communities with the services they need to live healthy and productive lives. The Department of Biotechnology (DBT) under the Ministry of Science and Technology of the Government of India and the Bill & Melinda Gates Foundation in collaboration with India’s Biotechnology Industry Research Assistance Council (BIRAC) launched a call for proposals as part of Grand Challenges India to reinvent the toilet. The Department of Biotechnology and the Gates Foundation will each invest US$1 million to support Indian investigators to drive research, development, and production of the “next generation toilet.” 4. Concentrated effort: Leadership is shown by corporations that direct their efforts on one social issue and align all their internal and external resources with this issue. 5. Partnering with experts: Leadership entails showing a high degree of credibility. This is best done through...
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Does your company have what it takes to be a leader-1

Does your company have what it takes to be a leader-1
What it takes to be a Leader What is #Corporate Social Responsibility? High performance is generally measured against key business imperatives including #competitive advantage, #sales, #talent management, #operational efficiency, #return on investment and profitability. It is no longer adequate for a corporation to revel in economic prosperity in isolation from those agents impacted by its actions. Today, a new element of leadership is making an intense difference in weighing  business performance: Corporate Social Responsibility. The late 1990s and the early 2000s saw an uptake in businesses giving proceeds or providing volunteers to causes related to their brands. Some called it “corporate social responsibility”; others called it “corporate #philanthropy” or “#corporate citizenship.” Regardless of its title, it was a way for business to increase visibility while raising funds for good. The spotlight is on both increasing the firm’s bottom line and being a good corporate citizen. Keeping abreast of global trends and remaining committed to financial obligations to deliver both private and public benefits have compelled organizations to restructure their frameworks, rules, and business models. Where does the roots of CSR lie? Although the #roots of CSR lie in altruistic activities (such as donations, charity, relief work, etc.) of corporations, globally, the concept of CSR has evolved and now embraces all allied concepts such as triple bottom line, corporate citizenship, philanthropy, #strategic philanthropy, #shared value, #corporate sustainability and business responsibility. You might be wondering what is “Triple bottom line?” (abbreviated as TBL or 3BL) – The term coined by John Elkington in 1994,  incorporates the notion of sustainability into business decisions. The TBL is an #accounting framework with three dimensions: social, environmental (or ecological) and financial. “A plethora of research points to a majority of stakeholders agreeing that CSR is a ‘must do’,” and  67% of consumers say they are more likely to buy products and services from a company if they know it supported good causes. Smart Corporations: As a key component in business #strategy and execution, CSR is playing a crucial role in helping organizations to be seen as leaders. Smart corporations are allocating increasing internal resources to CSR investments that include clear objectives and furnish measurable social outcomes. India is a country of multitude contradictions. On the one hand, it has grown to be one of the major economies in the world, and an increasingly important player in the emerging global order, on the other hand, it is still home to the largest number of people living in absolute poverty (even if the proportion of poor people has decreased) and the largest number of malnourished children. This is the sad state of uneven distribution of the benefits of growth which many believe, is the root cause of social unrest. Companies too have been the target of those disconcerted by this lop-sided development and as a result, their contributions to society are under severe scrutiny. Many companies have been astute to sense this development, and have responded proactively while others have done so only when advocated. What it takes to be a Leader-2...
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