Wednesday, November 11, 2009

CONTINUATION OF FINANCIAL MANAGEMENT

FINANCIAL MANAGEMENT CONTINUES



ANALYSIS OF FINANCE DECISIONS - -- --- ---- ----- ------ ------- -------- ---------

FINANCING DECISION, INVESTMENT DECISION AND DIVIDEND DECISION


FINANCIAL DECISION OR FUNCTIONAL FUNCTION INVOLVES THREE MAIN TYPES OF FINANCIAL MANAGEMENT LISTED ABOVE.

FINANCING DECISION:THIS INVOLVES DETERMINING THE APPROPRIATE FINANCE MIX OR CAPITAL STRUCTURE. THIS DECISION SIMPLY MEANS THAT A FINANCIAL MANAGER MUST KNOW WHERE AND HOW HE CAN OBTAIN FUNDS AND AT WHAT COST AND THE EFFECT ON FINANCIAL RISK USING ANY PARTICULAR SOURCE OF FUNDS. FINANCE MIX MEANS THE COMBINATION OF THE THREE SOURCES OF FINANCE, FROM THE SHORT TERM, MEDIUM AND LONG TERM SOURCE FROM THE INTERNAL AND EXTERNAL SOURCES.

INVESTMENT DECISION: THIS IS CONCERNED WITH THE ALLOCATION OF AN ORGANIZATION’S CAPITAL FUNDS TO INVESTMENT PROPOSALS THAT WILL YIELD FUTURE BENEFITS IN ORDER TO MEET THE EXPECTATIONS OF ALL INVESTORS OR STAKEHOLDERS IN A BUSINESS. BECAUSE THE FUTURE IS UNCERTAIN, INVESTMENT PROP[OSAL NECESSARILYNINVOLVES RISK. THIS DECISION IS MADE BY EXAMINING THE COMPETING PROJECTS AND INVEST IN THE PROJECT WITH EXPECTED HIGHER OR HIGHEST YIELD. AND THIS COULD BE ACHIEVED TECHNIQUES THAT INVOLVE SOME CALCULATIONS BASED ON THE PAY BACK PERIODS, AVERAGE RATE OF RETURN, NET PRESENT VALUE, INTERNAL RATE OF RETURN AND PROFITABILITY INDEX. I AM NOT GOING TO BOTHER YOU ON THE CALCULATIONS OR FORMAULARS BECAUSE THAT REQUIRES SPECIAL KNOWLEDGE AND SKILLS. HOWEVER, I WANT YOU TO UNDERSTAND THE BASIS AND IMPORTANCE OF FINANCIAL MANAGEMENT.


DIVIDEND DECISIONS: THIS INVOLVES THE DECISION ON HOW THE RETURNS FROM THE BUSINESS OPERATION WOULD BE SHARED.TO KNOW THE PROPORTION OF THE EARNINGS TO PAY OUT AS DIVIDEND OR TO RETAIN WITHIN THE FIRM. THE VALUE, IF ANY OF THE UNDECLARED DIVIDEND MUST BE BALANCED AGAINST ITS OPPORTUNITY COST.


LADIES AND GENTLEMEN, THAT WILL DO IT FOR THIS POST TODAY, WATCH OUT FOR THE NEXT POST AS I DEAL WITH THE DEFINITION OF SOME IMPORTANT CONCEPTS YOU MUST KNOW AS A FINACIAL MANAGER BOTH ONLINE OR ON LAND. OF COURSE YOU KNOW WE ARE ALL FINANCIAL MANAGERS AS HUMANS. THE CONCEPTS INCLUDE THE CONCEPT OF TIME VALUE OF MONEY, COMPOUND INTEREST, PRESENT AND FUTURE VALUE OF A LUMP SUM, ANNUITY, SINKING FUND AND LOAN AMORTIZATION. YOU WILL GET TO UNDERSTANS THESE CONCEPTS IN MY NEXT POST. KEEP IN TOUCH WITH THIS BLOG.

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KIND REGARDS AND GOODLUCK.

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