First financial management 23566432245556

First financial management 23566432245556

• 1.
  FINANCIAL MANAGEMENT
• 2.
  Variables Affecting SystemBehavior SYSTEM Leadership Sources
• 3.
  BUSINESS UNIT Business unitis a sociotechnical system that processes the production factors into economical goods and services for profit. Business units have vital importance in pushing the living standarts of the public.
• 4.
  Organizing A Business SoleProprietorships Partnerships Corporations
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  Characteristics of Business Organizations CharacteristicsSole Prop. Partner. Corp. Ownership Manager Partners Shareholders Manager-Owner Seperation Same Same Usually Seperated Owner’s Liability Unlimited Unlimited Limited Taxing Personal Income Personal Income Personal Income &Corporate Tax
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  Assets Real Assets:Used toproduce goods & services Tangible: Machinery, factory, offices Intangible:Trade mark,patents,technical expertise Financial Assets: Claims to the income generated by real assets. Also called securities.
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  Basic Problems Capital BudgetingDecision What real should the Firm acquire? Financing Decision How should cash be raised to finance real investments?
• 8.
  The Role ofFinancial Manager Firm’s Operations Real Assets Financial Manager Investors Money Flows
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  The Role ofFinancial Markets Firm’s Operations Real Assets Financial Manager Investors Money Flows Financial Markets Stock Markets Bond Markets Foreign Exchange etc. Financial Intermediaries Mutual Funds Pension Funds Financial Institutions Banks Insurance Companies
• 10.
  Goals of TheFinancial Management  Shareholders desire wealth maximization!  Do managers maximize shareholder wealth? Max VALUE = f ( I, F ) Max VALUE = f ( I, F, D )
• 11.
  Profitability Economy of Scale Productivity
• 12.
  Units Unit Price TOTAL Rate of Productivity Gross Total Rateof Commission Com. Paid Net Total Rate of Profitability 10 10 100 10% 110 0,200% 0,22 109,78 9,78% 100 10 1.000 10% 1.100 0,100% 1,10 1.098,90 9,89% 1000 10 10.000 10% 11.000 0,050% 5,50 10.994,50 9,95% 2500 10 25.000 10% 27.500 0,020% 5,50 27.494,50 9,98% Productivity & Profitability & Economic of Scale Rate of Profitability 9,75% 9,80% 9,85% 9,90% 9,95% 10,00% 1 2 3 4
• 13.
  Financial Leverage Rate of Return Costof Debt Debt Equity Total Source Rate of Return Cost of Debt Gross Income Debt+ Cost of debt Net Income Total Income Profitability of Invesment 0 10000 10000 15% 0% 11500 0 1500 11500 15% 10000 10000 20000 15% 5% 23000 10500 2500 12500 25% 10000 10000 20000 15% 20% 23000 12000 1000 11000 10% If the cost of debt < the rate of return; the profitability of investment increases If the cost of debt > the rate of return; the profitability of investment decreases
• 14.
  Financial Leverage (Effects ofDebt-Equity Ratio) Amount of Equity Amount of Debt Debt Equity Total Source Rate of Return Cost of Debt Gross Income Debt+ Cost of debt Net Income Total Income Profitability of Invesment 0 10000 10000 15% 0% 11500 0 1500 11500 15% 20000 10000 30000 15% 25% 34500 25000 -500 9500 -5% 10000 20000 30000 15% 25% 34500 12500 2000 12000 12% If the amount of debt < the amount of equity; the profitability of investment decreases If the amount of debt > the amount of equity; the profitability of investment increases