Financial management or managerial finance is an interesting, exciting and dynamic area of study and its importance to the long-run success of today’s business in unquestioned.
The finance has emerged as a distinct field only after the emergence of and formation of corporate bodies.
Financial management is concerned with the acquisition, financing and management of assets and liabilities of a firm with a view to improving the wealth of the shareholder in the long run.
The important tasks of financial management are:
Financial analysis, planning and control comprising of profit planning, financial forecasting and financial control.
Resourcing which includes identification of sources of finance and obtaining finance.
Financing consisting of allocating assets and capital expenditure decisions.
The student in order to master himself in financial management should be thorough in the following topics coming under financial management: Share capital, Cost of capital, valuation of financial assets, business risk, financial lease capital, financial leverage, financial planning, internal rate of return, leverage buy-outs, net present value, operating lease, profitability index, optimal capital structure etc.
Share capital consists of ordinary or preference share capital. Preference capital carry two preferential rights, namely, right to a fixed rate of dividend before the ordinary shareholders and a right to receive the surplus before the ordinary in case of winding up of the company. The equity shareholders are the virtual owners of the company. They enjoy voting rights and, the Board of Directors is elected by them. The share capital contributed is a permanent fund for the company and need not be returned till winding up takes place.
Cost of capital is the rate of return a company must earn on investment which is just sufficient to maintain the value of business. An investment that earns a return higher than the cost of capital will increase the value of business and an investment that earns below the cost of capital will reduce the value of business. Cost of capital can be bifurcated as average cost of capital and marginal cost of capital.
Average cost of capital is the weighted average after tax cost of components of new capital raised during a given period.
The second cost of interest is marginal cost of capital and the average cost is equal to the marginal cost over some range of capital raised beyond which both costs begin to rise.
Thus, financial management is an interesting subject and the student by planning his study strategies can definitely master the entire topics available in financial management. Towards guiding the student community in achieving better results in their academic pursuits, many websites are offering online home work help on different subjects including finance management. Online home work help can be obtained by sitting in the comforts of his home just by clicking the best educational website through internet. It has also to be noted that the amount involved in acquiring online home work help is cheaper than amount incurred for study through any other sources.
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