Advanced Financial Management

 Lecture -1 

Advanced financial management Introduction : Finance is defined as the provision of money at the time when it is required. Every enterprise, whether big, medium, small, needs finance to carry on its operations and to achieve its target. In fact, finance is so indispensable today that it is rightly said to be the blood of an enterprise. Without adequate finance, no enterprise can possibly accomplish its objectives. 

Meaning of Financial Management: Financial management refers to that part of the management activity, which is concerned with the planning, & controlling of firm’s financial resources. It deals with finding out various sources for raising funds for the firm. Financial management is practiced by many corporate firms and can be called Corporation finance or Business Finance. financial management deals with 

• Financial decisions 

• Investment deciasions 

• Dividend decisions 

• Working capital decisions 

Financial Decision: Financial decision is a process which is responsible for all the decisions related with liabilities and stockholder’s equity of the company as well as the issuance of bonds through proper financial planning. 

Investment decision : The investment decision means capital budgeting. Choice is required to be made amongst available alternative revenues for investments. As such investment decisions are concerned with the choice of acquiring real assets over the time period in a productive process. 

Dividend decision : The third major financial decision relates to the disbursement of profits back to investors who supplied capital to the firm. The term dividend refers to that part of profits of a company which is distributed by it among its shareholders. 

Working capital management is a strategy that requires monitoring a company's current assets and liabilities to ensure its efficient operation. 

The focus of the course is on corporate finance. Corporate finance is about the efficient attracting and investing of corporate funds. Analysis of investments is done with the use of particular investment appraisal techniques.

capital budgeting under uncertainty 

Investment Decision 

The Investment Decision relates to the decision made by the investors or the top level management with respect to the amount of funds to be deployed in the investment opportunities. Simply, selecting the type of assets in which the funds will be invested by the firm is termed as the investment decision. These assets fall into two categories: 

• Long Term Assets 

• Short-Term Assets 

Risk analysis in capital budgeting. In the third semester you people already studied ,evaluation of investment proposal by using Capital budgeting techniques without using the risk elements in the projects. In a real life situation evaluation of investment proposal with out risk is of meaning less. The cash flows of the business firms are directly influenced by different types of risks namely systematic and unsystematic risks. Risk and types of risk In the financial world, risk management is the process of identification, analysis and acceptance or mitigation of uncertainty in investment decisions. The cash flows of the business firms are directly influenced by different types of risks namely systematic and unsystematic risks 

Systematic risk : Systematic risk are associated with market where the business firm had to adjust its operations according to changing business situation systematic risk includes the fallowing Types • Interest rate risk 

• Market risk 

• Purchaseing power risk 

• Exchange rate risk 

• Political risk 

Unsystematic risk : Unsystematic risk, or specific risk, is that which is associated with a particular investment such a company's stock. Unsystematic risk can be mitigated through diversification, and so is also known as diversifiable risk. Once diversified, investors are still subject to market-wide systematic risk Types 

• Business risk 

• financial risk 

• credit risk 

• operational risk