Agency problem

It is the conflict of interests between the principal and the agent. In financial management agency problem refers to the conflict of interest between the shareholders and managers who can appropriately be viewed as the prinicipals and agents rspectively. There is agency problem also between shareholders(through managers)as agents and creditors as principals in agency problem in a firm in 1976.
Agency problem between the shareholders and managers
Mechanism to resolve the conflict of interests between shareholders and managers
Agency problem between stockholders and creditors
Mechanism to resolve the conflict of interest between share holders and creditors

Goals of financial management

Objectives of the firm or corporation refer to the purpose for which the finance functions are carried on.The objectives provide criteria for financial decisions making. It is very much essential to have right goals for right financial decisions.Objectives provide guidelines for financial decisions and functions. hence , these objectives are also called as goal of the financial management or financial goal.so setting appropriate objectives is very much important for the sucessful operation of the firm. There are mainly two widely discussed objectives of a firm. They are as follows:
- Profit maximization
- Shareholders wealth maximization

Relationship with other functional areas

It is one of the functional areas in a business organization. There are other functional areas like production, marketing and human resource.The financial manager's work do not confine in the finance department, s/he work on coordintaion with other functional managers in the organization. It is because decisions taken in any area have financial implications. The controller can complete the budgeting and profit planning with the help of all other departments.Controller works in close coordination with sales department while preparing sales budget and selling and distribution overhead budget. The controller prepares productionn budget,laborbudget,and factory overhead budget in coordination with production department. The relationship of financial management management with other functional areas is discussed below:
Marketing management
Production management
Human resource management

The financial manager's responsibilities

The term ' financial manager' is used to referto vice-president finance , treasurer, controller and other managers working under them. Financial jobs of an organization are divided among the financial managers according to the need and organizational stucture of the firm. Basically, financial managers involve in investment decision, financing decision and dividend decision so as to maximize the value of the firm.The specific responsibilities of a financial manager can be given as below:
Planning and controlling
Investment decision, financing and dividend decision
Dealing with financial markets
Risk management

Routine finance functions

Routine finance functions are performed to the effective execution of executive finance functions.Some of the routine finance functions are as follows:

Supervision of cash receipts and disbursements
Safegaurding of cash balances
Custody and safegaurding of valuable documents like securities and ansurance policies.
Taking care of mechanical details of financing
Record keeping of the financial performance of the firm
Reporting to the top management
Supervision of fixed assts and currents assets

Executive finance functions

They are those functions that require managerial skills their planning , execution and control. Since these functions require greater managerial ability, they are also known as managerial finance functions. The executive finance functions can be explained as below:
Long term investment decision
Financing decision
-Deciding upon tneeds and sources of financing
-Carrying on negotiation for new outside financing
Dividend decisionWorking capital decision

Functions of financial management

What are done or decided to achieve the objective of the firm from the viewpoint of finanacial management are known as finance funtions or decisions.
There are mainly two approaches to express the 'finance functions'. They are
Executive finance functions
Routine finance functions

Finance in the organizational structure of the firm

No business firm functions smoothly without proper authority - responsibility relationship of the persons working for the firm . organizations of finance function refers to the authority and responibilty relationship among persons incolced in finance functions in an organizations. I other words, it is the division of work among the persons who caryy in finanace functions. proper organization of finance function helps to avoid confusion on roles and responsibilities of employees, and the duplication and overlap of the activities. It is also known as organizations of financial managment functions.

Importance of financial management

Decisions taken in every functional area of a firm has financial implications . Therfore , every major decision must be judged from the perspective if fianancial management to aviod sure failure of the business . Financial management important mainly because it helps to make decisions that are consitent to the maximization of value of the firm to its owners . The importance of financial managemnt to firm can be presented as below.
Helps setting clear goal
felps efficient utilization of resources
helps deciding sources of financing
Helps making dividend decision

Nature of finanacial management

a firm in an economy with a goal- to create value to its owners. to pursue its goal the firm preforms various activities such as supplying goods and services in the economy . the establishment and operation of a firm requires resources of various types. For example , if you decide to run it, first, you will have to acquire fixed asstes such as building, land , and machinaries, etc. deciding the procurement of these assetes, in the language of finanae, is an investment decision.
the firm must pay to the investors on debt securities periodically whether it earns profit or not. but there is no legal compulsiona to pay to the equity shareholders. it means the firm has a choice as regards to the distrubution of its earning - it may choose to distribute or retain all earning or to distribute a portion of it and retain the balance. this decision related to the distribution of earning is known as dividend decision. further, you need to decide the sources and amount of capital needed to purchsae the raw materials , and for paying the wages and salaries . you want to maintain sufficient cash and inverntories to run the day to day business smoothly. this form of capital is known as working capital and decision it is known as working capital management.

The Academic Discipline

At the present state, the academic discipline of finance includes the following specialized areas in it scopes.
Public finance
Securities and investment analysis
Institutional finanace
International finanace
Finanacial management
the popularity of the suject of finanace is increasing day by day. it is beacause the study of finanace offers rewarding careers oppurtunities mainly in above areas.
The popularity of the subject of finance is increasing day by day. it is because the sutdy of finance offers rewarding careers opportunities mainly in above areas. Hence, not only universities but also professional programs like, certfied public accountants ,chartered accountants, certified financial analysts have included finance in their curricula. it is impossible to cover all these areas in a single book like this. therefor, in this book we cover only one area of finance - the financial management

Finance

The term finance should be understood in two perspectives- finances as a resource and finance as a discipline . Finance as a resources, refers to monetary means of financing asstes of an entity. Finanace, as a discipline or a suject of study,describes how individuals , governments, and corporate organizations manage the flows of money through an organization. In other words. it tells us how people make decisions about the collection and allocation of resources in organizations like corporation, school, bank or government agency. therefore , it is important for all -indidviduals , business , governments, and non governments organizations to appreciate the significance of finanace in their day to day business.
Finance was a branch of economics till the closure of nineteenth century .Finance as a separate academic discipline is still evolving.practicing managers and academicians have been contributing in its expansion and enrichment . at the present state , the academicdiscipline if finance includes tha following specialized areas in its scope