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Financial Management With Case Study

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Gökhan SARI

on 14 March 2013

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Transcript of Financial Management With Case Study

Overview of
Financial Management Key Concepts Know the basic types of financial management decisions and the role of the financial manager

Know the goal of financial management

Understand the conflicts of interest that can arise between owners and managers

Case Study The Four Basic Areas Of Finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make these decisions

The primary goal of corporate finance is to maximize shareholder value. The investments area deals with financial assets such as stocks and bonds. Some of the more important questions include:
What determines the price of a financial asset such as a share of stock?
What are the potential risks and rewards associated with investing in financial assets?
What is the best mixture of the different types of financial assets to hold? 1. Corporate Finance 2. Investment 3. Financial Institutions Financial institutions are basically businesses that deal primarily in financial matters.
Banks and insurance companies would probably be the most familiar to you. It may allow you to work in other countries or at least travel on a regular basis

Need to be familiar with exchange rates and political risk

Need to understand the customs of other countries and
speaking a foreign language fluently is also helpful 4. International Finance Importance of Finance Budgets, marketing research, marketing financial products Dual accounting and finance function, preparation of financial statements Strategic thinking, job performance and profitability Budgeting, retirement planning, college planning, day-to-day cash flow issues Marketing Accounting Management Personal Finance What Is Business Finance? Imagine you were to start your own business. No matter what type you started, you would have to answer the following three questions in some form or another: Business Finance And The Financial Manager Where will you get the long-term financing to pay for your investment?

Will you bring in other owners or will you borrow the money? How will you manage your everyday financial activities such as collecting from customers and paying suppliers? What long-term investments should you take on?

That is, what lines of business will you be in and what sorts of buildings, machinery, and equipment will you need? The treasurer’s office is responsible for managing the firm’s cash and credit, its financial planning, and its capital expenditures Financial Managers Financial managers try to answer some or all of these questions Chief Financial Officer (CFO) The top financial manager within a firm The vice president of finance coordinates the activities of the treasurer and the controller. The controller’s office handles cost and financial accounting, tax payments, and management information systems. Financial Management Decisions Capital Budgeting How do we manage the day-to-day finances of the firm? What long-term investments or projects should the business take on? Capital Structure How should we pay for our assets?
How the firm obtains the financing it needs to support its long-term investments?
Should we use debt or equity? Working Capital Management Goal Of Financial Management What should be the goal of a corporation? Maximize profit?
Minimize costs?
Maximize market share?
Maximize the current value of the company’s stock? The goal of financial management is to maximize the current value per share of the existing stock. The Agency Problem Agency Relationship The owners of the firm will wish to take the investment (because the share value will rise), but management may not because there is the possibility that things will turn out badly and management jobs will be lost. Principal hires an agent to represent their interest
Stockholders (principals) hire managers (agents) to run the company Agency Problem Conflict of interest between principal and agent Management Goals and Agency Costs Managing Managers Managerial Compensation Employees, customers, suppliers, and the government may (stakeholders) have financial interest in the firm. Incentives (encouragements) can be used to align management and stockholder interests The incentives need to be structured carefully to make sure that they achieve their goal For Exm; Golden Parachutes (An agreement between a company and an employee, usually an executive, specifying that the employee will receive certain significant benefits if employment is terminated) Financial Markets Cash flows between the firm and the financial markets Cash Flows “to and from” the Firm CASE STUDY This study aims at determining the financial management practices of Small and Medium Enterprises (SMEs) in Afyonkarahisar.

Financial management applications have been analyzed for 48 company in the City. FINDINGS RELATED TO FIXED ASSET INVESTMENT A-Please define the importance of expense items by regarding fixed asset investment. 1)Main Machine and Equipments
2)Construction Expenses
3)Land Value
4)License and Patents
5)Imports and Clearance
6)Survey and Project Expenses
7)Commissioning Expenses 4,8
1,9 F-Please indicate participation rate in the following statements for busines success. 1)Investment in period to return money and maturing liability should be compatible with each other
2)Default in out-sourcing is the foremost subject
3)Cost is the priority subject in out-sourcing
4)Even if there are credit sources, focusing one’s attention on equity capital is better in terms of success in business organization
5)Flexibility in out-sourcing is the foremost subject 4,35


3,56 B-Please define the methods of fixed capital decisions. 1)a. Simple Stabilization
2)a and b Together
3)b. Payback Period Management
4)a, b and c together
5)c. Net Present Value Methods
6)d. Profitability Index
7)e. Internal Rate of Return
8)f. Liquidation Analysis on Balance Sheet
9)g. Financial Assessment
10)h. Risk Analysis 4,9
1 C-Please indicate the priority of sources for the financing of investments in fixed asset Investments 1)Part-owners: 4,6
2)Commercial Banks: 3,9
3)Popular Bank: 3,0
4)Leasing: 2,9
5)Investment Banks: 2,0
6)Other: 1,5 4,6
1,5 D-What type of investments do you usually make? 1)Expansion
4)New Investment 4,3
2,3 E-Do you take recognizance of optimum of organization’s liability ratio in fix asset investments? %

29,2 N


No G-Please indicate the risk degree for your organization in the following statements 1)Possibility of exchange rate fluctuation creates a significant risk for our business organization

2)Rate of interest creates a significant risk for our business organization 3,75

3,14 H-Finding Relating to Working Capital Management 1)Cash Budget Regulation
2)Making Credit Analysis for Customers who intent on time bargain
3)Making Early Payment Deduction in order to expedite cash proceeds
4)Follow-up Expired Debt
5)Monitoring measures of operational capital for requisite routine operations
6)Monitoring Stock Levels:
7)Planning to order process for raw material and equipments
8)Do you regard to amount of possession cash in short term borrowing, account receivable and stock etc.?
9)How often do you assess to day of payment of amount due?
10)Do you check on reaching monetary goals or not achievement? Never






1 Rarely






5 Often






40 Thank you for listening Gökhan SARI
Full transcript