Question

1. Why is the study of financial management important? Offer examples of how poor financial management can ruin a company. Provide specific real-life examples to back up your assertions.

2. Pick a decade (from 1920’s to today) and discuss the market performance in that 10 year period. What were some of the major drivers of performance during that decade?

Answer 1

1. Study of Financial management is important because it helps in analysis of overall funds and effective utilisation of those fund for maximizing the benefits of the company.

Financial management is the management of finance of the company. Finance is known to be the blood of the business so it need to be effectively monitored and properly planned in order to achieve objectives through effective and efficient utilisation of funds.

Examples of bad financial management can be seen through various Indian banking companies when they lent various loans which were sub standard in nature and eventually turned NPA leading to two crisis of their survival and existence like Yes Bank.

2. I choose the decade 2010 to 2020 in which global economy grew very significantly with the use of foreign inflows as well as stimulation from the central banks in the form of quantitative easing in monetary policies.

In the past 10 years market performance have been on the upside and various stock market almost doubled during this periods. This could be attributed to the liquidity provided by foreign funds and index inflows as well as stimulus provided by central banks in the form of ease in monetary policies