financialmanagement-120904002433-phpapp01

financialmanagement-120904002433-phpapp01 - Module1 Unit1:...

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Module - 1 ------------------------------------------------------------------------------- Unit 1: Nature and Scope of Financial Management -------------------------------------------------------- Objectives to give an insight into the Financial Management To identify major areas of decision making in financial management To give a overall view of the scope of financial management. Unit Outline 1.1Introduction  1.2Meaning of Business Finance. 1.3Definitions of Financial Management 1.4Which are the major areas of decision making in financial management? 1.5Scope of financial management -------------------------------------------------------------------------------1.1 INTRODUCTION ---------------------------------------------------------------- Finance   is   the   lifeblood   of   business   organisations,   without   finance   the   formation, establishment, production, functioning or operating of big, medium or small business enterprise is not possible.  Finance  may be defined as the art and science of managing money. The major areas of finance are  1 ) financial services and  2 ) financial management.  Financial Services  is concerned with the design and delivery of products to individuals, business and government within the areas of financial institutions, personal financial planning, investments, real estate, 1
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and so on.  Financial management  is concerned with the duties of the financial mangers in the business firm. The subject of finance is traditionally classified into two classes  1) Public Finance and 2) Private Finance.  Public finance deals with the requirements, receipts, and disbursement of funds in the government institutions like states, local self-governments and central governments. Whereas the private finance deals with the requirements, receipts and disbursement of funds by the individual, a business organisation and non-business organisation. The private finance from the above we can once again classified into personal finance and business finance and finance of non-business organisation.  ------------------------------------------------------------------------------- 1.2MEANING OF BUSINESS FINANCE --------------------------------------------------------------------------- To understand the meaning of business finance there is a need to understand the concepts business and finance. Business may be understood as the organised efforts of enterprises to supply consumers with goods and services for satisfying these needs and wants and in the process. All businesses share the same purpose that is to earn profits. Broadly speaking, the term business includes industry, trade and commerce.  Finance refers to provisioning of money at the time when it is required. Here finance refers to management of flows of money through an organisation. Hence  Business Finance concerned with acquisition of funds, use of funds and distribution of profits by a business firm.  The business finance can be further classified in to sole proprietary finance, partnership finance and company or corporate finance. The principle of business finance can be applied to
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