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    adeogharia
    * Mr. X invested Rs. 1000 in a savings bank account * Interest rate is 5% per annum compounded annually * Time period is 3 years * Using formula for compound interest: Future Value (FV) = Principal (P) × (1 + Rate of Interest/100)^Time (in years) * P = Rs. 1000 * Rate of Interest (R) = 5% * Time (T) = 3 years * FV = Rs. 1000 × (1 + 5/100)^3 = Rs. 1000 × (1.05)^3 = Rs. 1000 × 1.1575 = Rs. 1157.5 Therefore, the value of Mr

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    Presentation 2

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    * Mr. X invested Rs. 1000 in a savings bank account * Interest rate is 5% per annum compounded annually * Time period is 3 years * Using formula for compound interest: Future Value (FV) = Principal (P) × (1 + Rate of Interest/100)^Time (in years) * P = Rs. 1000 * Rate of Interest (R) = 5% * Time (T) = 3 years * FV = Rs. 1000 × (1 + 5/100)^3 = Rs. 1000 × (1.05)^3 = Rs. 1000 × 1.1575 = Rs. 1157.5 Therefore, the value of Mr

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    * Mr. X invested Rs. 1000 in a savings bank account * Interest rate is 5% per annum compounded annually * Time period is 3 years * Using formula for compound interest: Future Value (FV) = Principal (P) × (1 + Rate of Interest/100)^Time (in years) * P = Rs. 1000 * Rate of Interest (R) = 5% * Time (T) = 3 years * FV = Rs. 1000 × (1 + 5/100)^3 = Rs. 1000 × (1.05)^3 = Rs. 1000 × 1.1575 = Rs. 1157.5 Therefore, the value of Mr

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    33 views23 pages

    Presentation 2

    Uploaded by

    adeogharia
    * Mr. X invested Rs. 1000 in a savings bank account * Interest rate is 5% per annum compounded annually * Time period is 3 years * Using formula for compound interest: Future Value (FV) = Principal (P) × (1 + Rate of Interest/100)^Time (in years) * P = Rs. 1000 * Rate of Interest (R) = 5% * Time (T) = 3 years * FV = Rs. 1000 × (1 + 5/100)^3 = Rs. 1000 × (1.05)^3 = Rs. 1000 × 1.1575 = Rs. 1157.5 Therefore, the value of Mr

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    Financial System

    Intermediary Market Role

    Stock Exchange Capital Market Secondary Market to


    securities
    Investment Bankers Capital Market, Credit Corporate advisory
    Market services, Issue of
    securities
    Underwriters Capital Market, Money Subscribe to
    Market unsubscribed portion
    of securities
    Registrars, Capital Market
    Depositories, Issue securities to the
    Custodians investors on behalf of
    the company and
    handle share transfer
    activity

    Forex Dealers Forex Market Ensure exchange ink


    currencies

    The financial system is characterized by the
    presence of integrated, organized and
    regulated financial markets, and institutions
    that meet the short term and long term
    financial needs of both the household and
    corporate sector
     What is finance ?

     Why do I learn finance ?


    Why Financial Management for
    Non Finance Managers?

     Cutting down layers of corporate pyramid


     Broadening of responsibilities
     Vertical & Horizontal responsibility
     Cross functional capabilities-the rule and
    not the exception
    What the general activities of the firm?
    How they are related

    PRODUCTIO
    MARKETING FINANCE
    N
    EVOLUTION OF FM
    Changing role of Financial managers

    • Traditional

    • Transitional

    • Modern: Wealth maximization-analytical &


    quantitative
     Early 1900 : instrument, institution, and procedures of
    capital market and money market
     Around 1920 : focus on security and banking sector,
    and investment in common stock
     Around 1930 : focus on liquidity, debt, regulation,
    bankruptcy, reorganization
     Early 1940 and 1950 : internal analysis, planning and
    controlling cash flow
     End of 1950 : capital budgeting, valuation, and
    dividend policy
     Around 1960 : development of portfolio theory
     Around 1970 : CAPM model and APT model that can be
    used to value the financial assets
     Around 1980 : focus on uncertainty, asymmetric
    information, financial signaling
     Around 1990 : multinational financial management,
    behavioral finance, enterprise risk management, good
    corporate governance
    Objectives
     Profit Maximization
    Implies that ,the investment, financing and dividend
    policy decisions of a firm should be oriented to the
    maximization of profits

     Wealth Maximization
    Maximize value of its shares
    Value maximization or net present worth
    Maximization
    W= V-C
    Share Holder Orientation In
    India
    Dependence on Capital Market

    Importance of Institutional Investors

    Abolition of wealth tax on Financial Assets

    Foreign Exposure
    Finance function
    Liabilities Assets
    Net fixed asset
    Equity
    Financing investment
    Debt Net working capital

    dividen
    d
    Principle of Finance

    Provides
    initial cash
    to finance
    Investors The business proposal
    -Shareholders
    -Lenders

    Generates
    cash return
    Financial Decisions & Risk-Return
    trade off

    Market value of the firm


    Capital budgeting

    Capital Structure Risk

    Dividend Return

    Working Capital
     Emerging Role of Finance Managers in
    India
    MANAGERS Vs Shareholders
     Principal agent relationship

     Agency problem
    Scope of Financial Management

    Financial Management
    involves the application of
    general management
    principles to particular
    financial operation
    Role of Financial Manager

     Formulating objectives
     Forecasting and estimating capital requirement
     Designing capital structure
     Determining suitable sources of finance
     Dispersal of ratio
     Maintaining proper liquidity
     Preserving stakeholders wealth
    Risk Return Trade Off
    Expected return

    Risk Premium

    Risk Free Return

    risk

    Return = Risk free rate + risk premium


    Time value of money
     “ the sum of money received today is more
    than its value received after some times
    2 technique
     Compounded value – future value

     Discounting --- present value


     Mr. X invests in a savings bank account Rs.
    1000 at 5 per cent interest compounded
    annually . What will be the value of his fund
    after 3 years

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