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Financial management- Overview:

Acquisition and use of funds by a business firm-o Optimally.o Profitably.

Scope is broadly defined by :o Largeness of t e firm.o Fastness of growt .o !omposition of firm"s asset.o #i$ of firms finance.o Analy%e&plan&control.o 'nvironment.

Poser: (ow does t e composition of firm"s asset c allenge a treasury manager)

Poser: *ould you be appy as a treasury manager in a less capital intensive firm) -debate

Main divisions of financial management:

Financing activities:o Deciding the capital structure.o Finding the suitable sources for funds.

Investing of funds:o Deciding the mix:

Fixed Assets.Current Assets.

o Appraisal of the assetsTechnical.EconomicalFinancial.

Creating financial opportunities through non financial interventions.

Financial planning:o rofit planning.o Financial forecasting.o Financial control.o !is" Assessment.

Financing function is managed b#:

Treasurer. Controller.

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Treasurer:$ %is tas" is mainl# concerned &ith the financing ' investment functions ta"inginto account the ris" profiles of such activities for the forecasted financial position of thefirm. %is basic functions include:

!aising (ong term capital. )orro&ing short term. Investment in fixed and current assets. Investment ' portfolio management. Credit administration. )an"ing relationships. ro*ect management. +or"ing capital Management. Currenc# Management and forecasting. Foreign exchange management. Maintaining relationship &ith others to manage the above mentioned functions.

Controller: %e is an information handler, provider and interpreter mainl# concerned &ithaccounting and control. %is functions include:

roviding accounting and financial information. reparation of budgets ' other information for the management. reparation of financial statements. !eporting to External and internal auditors-statutor# bodies. Asset control. Taxation. ecretarial &or". Custod# of records.

oser: Treasurer ' Controller complement each others *ob: rovide fe& instances tosubstantiate this statement.

oser: Do #ou thin" of an# attitudinal difference bet&een the t&o/ If so &hat/

+hich function #ou thin" #ou are better suited to/ $ Debate

Influences on the treasur# manager: Changes in the financial environment.

Financial innovation. Changes in interest rates -structure-pattern. Changes in technolog#-methodolog#-policies.

oser: 0ive one contemporar# example for each of the influences.

olic# Frame &or" of Treasur# manager:

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Finali1ation of Financial ob*ectives. 2pting for financial structuring and electing the investment opportunities based

on:o 3ield: 4i5 6uantum. 4ii5 attern.o Cost 4i5 tatutor#. 4ii5Transaction.o

2perational convenience.o (i7uidit# factors.o Maturit# rofile.o %olding: 4i5 attern. 4ii5 eriod. 4iii5 Complexities.o Dealings &ith financial intermediaries.o Dealing in securities. 4i5 tri"ing deal. 4ii5Accounting.o Initiating non fund interventions.o !is" Management interventions.o Forecasting the financial needs.

Factors involved in the deciding of a suitable treasur# organi1ation: 0roup structure and i1e. Management philosoph# and culture. Extent of ris" ta"ing. Mar"et environmental potential. Economies of scale.

oser: 0et a specimen of a treasur# organi1ational structure from an# of the big companies.

resent cenario:

Turbulence in the capital mar"ets. Fe&er instruments for financing. Complex instruments. 8olatile credit availabilit#. !estrictions-ris"s in investing opportunities. %ighl# volatile and less professionall# developed and supported securities mar"et. Complex ' tard# statutor# s#stem. (ac" of efficient manpo&er and technolog#. Close integration &ith global fortunes and misfortunes.

oser: Choose an# of the points mentioned above and provide a contemporar# example.

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Treasur# Information #stem:

Essential re7uisites:o 6uic".o

Accurate.o 9nambiguous.

Comprises of o Internal (in"s. 4Co$ordination bet&een various offices5o External lin"s.4Co$ordination &ith )an"s,FI5

Treasurer

Fundmanager

Treasur#

2perationsManager

Cash

management-

Forecasting

hortterm

financing(i7uidit#

management

Currenc#Manager

$reporting$!is"

management$dealing

ortfolioManager

$Investment$Monitoringthe mar"ets

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o Creation and Maintaining Decision upport #stems.o Transaction support.o !eport generation.

Treasur# Manager needs constant updating in:

Current Economic Development' economic policies. International developments and international economies and their impact on the

national econom#. Monitor# policies. Fiscal and budgetar# policies and its implications to the econom# in general to the

firm in particular. Foreign trade and foreign exchange policies. Trends in financial mar"ets both under mone# and capital mar"ets. Current financial practices and the li"el# changes in the near future. ;no&ledge of the competitors functioning. trategic needs in financial management.