Question

(COURSE) MKTG1370

Summarize what you have learned in this course.

Answer 1

A firm dependably exists in an economy, it performs different task to accomplish its targets. Every one of the exercises of a firm is coordinated by its objective, for example, to get benefit, to make an incentive to its proprietor and so forth. A firm run and play out its activity through its different assets and assets like, crude material, capital, resources, and human asset and so on. Consequently budgetary administration manages securing assets/finance and apportioning those assets viably to accomplish its destinations effectively. Till a decade ago monetary Management was considered as a part of financial matters, however now due to dynamic business condition, changing innovation and the impact of globalization in financial aspects comes to isolate the topic of money related administration. Money related Management assumes an indispensable job in business basic leadership. For the most part it is worried about venture choice, financing choice, profit choice and working capital management. It is not only concerned with running of a firm but also concerned with maintaining its profit learning to the shareholder and financer i.e. debenture holder.

6 Results for A firm always exists in an economy, it performs various operation to achieve its objectives. All the activities of a firm is directed by its goal such as to acquire profit, to create value to its owner

• Value
• Blue Book Value
• Value My Car
• Value Med
• Zillow Home Value
• True Car Value

In short financial management is concerned with acquisition, financing and management of resources in order to maximize the wealth of the shareholder.

Financial management is very important in different aspects of business, they are given below.

i) Helpful in Setting goal: As we know that all activities of a firm is directed at its goal. Though financial management manager can defines the goal of the firm more clearly in terms of maximization of the shareholders wealth. Financial management helps in setting goal and give a chance to judge the decision and co ordinates other function of firm on achieving its goal efficiently.

ii) Optimum utilization of Resources: Firm use fixed as well as current assets and a huge amount of investment is made on such assets. If wrong decision is made regarding the purchase and disposal of fixed assets can cause threat to the firm. So one of the major important.
Application of financial management is to help on deciding which assets to buy, when to buy and whether to replace the existing assets with the new one or not as well as the management of current assets to be maintained in the firm.

iii) Help in choosing wellsprings of financing: Firm need long haul finance for its activity and wellspring of such reserve might be value share, inclination share, bond, advance and so forth. The firm need to choose the fitting blend of these sources and measure of long haul finance, generally the firm should bear greater expense and open to higher hazard. In this way budgetary administration like capital structure speculations helps in choosing the wellsprings of financing among various options referenced above.

iv) To get success in competition: This time is the time of globalization and we know that even a small firm must compete in a global economy. Due to fast change in technology, economy and business environment, it creates a tuff competition and firm should make good decision to stay exists in economy. So many financial management techniques help a firm to compete in such dynamic economy.

Goals of financial Management

Profit Maximization Goal:  

According to this goal, only that financial action which increases profit of firm should be taken and those which decrease profit must be avoided. This type of goal is profit oriented and it focuses on that financial function which maximizes profit. The profit maximization goal argue that profit is a test of economic efficiency, it leads to effective utilization of scarce economic resources in every business firm and ultimately it leads to total economic welfare since it increase economic efficiency of every firm.

Argument in favour of profit maximization

I) Understandable and simple

ii) Decision Principle: profit maximization is considered to be a basic principle for financial decision making.

iii) Measurement of efficiency

iv) Maximize social welfare

Criticism

I) Vague and ambiguous (hard to interpret)

ii) Ignore time value of money

iii) Ignore the quality of benefit (ignore social responsibility)

iv) Ignore risk element

V) Unsuitable in modern business environment

Wealth Maximization Goal:

According to this goal, the firm should only take that decision which maximizes the shareholders wealth, and wealth is defined as the net present value which is the difference between present value of the benefits of a project and present value of its cost. A financial action which result negative present value should be avoided, and which result positive present value should be accepted. When a firm's net present value is high which belongs to shareholders hence increase their wealth. Ultimately investor pay high price for a share of firm having higher net present value. Wealth maximization always reflected in the market price of share. Thus stock price maximization is considered superior to profit maximization goal because it consider risk of earning, dividend policy, present and expected earnings per share, time value of money and other factor that bear on the market price of stock.

Argument in favor of Wealth maximization

i) Clear to understand and interpret

ii) It consider time value of money

iii) It consider quality of benefit

iv) It reduces the conflict of interest between stockholders of firm.