Basics Finance

8/11/2019 Basics Finance

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What is the Difference between Finance and

Accounting? Functions of Finance: The finance function relates

to three major decisions which the finance

manager has to take.

1. Investment Decision

2. Financing Decision

3. Dividend Decision


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Working Capital Management

According to one study : Top Indian firms (chemicals and fertilizers, food

producers, information technology, oil and gas, steel, auto parts,

pharmaceuticals, and machinery makers) could have had Rs.5.3 trillion in

cash at their disposal in the last fiscal year (2012-13) if they had efficiently

managed their Working capital cycle.

Capital udgeting Decision

Once projects have been identified, management then begins the financial

process of determining whether or not the project should be pursued. The

three common capital budgeting decision tools are the payback period, netpresent value (NPV) method and the internal rate of return (IRR) method.


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Financing Decision

Under financing decision the financial manager are expected toidentify various sources of finance and determine which sourceis best for the project

While taking this decision, financial management weighs theadvantages and disadvantages of the different sources of finance.

The business can either finance from its shareholder fundswhich can be subdivided into equity share capital, preference

share capital and the accumulated profits.

Borrowings from outsiders include borrowed funds likedebentures and loans from financial institutions.


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Working

CapitalProducts

FB

Domestic

CC

OD

BD

ExportPre & PostShipment

NFB

BG

L/c

Structured

CommercialPaper

Buyer's Credit

Supplier'sCredit

CorporateLoans

Securitization

Factoring

Forfaiting


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Dividend Decision

Under financing decision the financial manager are expected toidentify various sources of finance and determine which sourceis best for the project

While taking this decision, financial management weighs theadvantages and disadvantages of the different sources of finance.

The business can either finance from its shareholder fundswhich can be subdivided into equity share capital, preference

share capital and the accumulated profits.

Borrowings from outsiders include borrowed funds likedebentures and loans from financial institutions.


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Financial Institution

FIs

Banks

Mutual Funds

Non banking

institutions

Insurance &Housing Finance

companies & Microfinance institutions


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Type of Banks

Scheduled

Co-operative

Rural Urban

Commercial

Nationalized BankRegional Rural

bankForeign Bank Private bank

Non-Scheduled


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NBFI

NBFC (Sundaramfinance, LIC housing

finance, TATA finance)

Development FinancialInstitutions (IDBI, SIDBI,

NABARD, SFC, ECGCetc)


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Financial Market

1. Capital Market

2. Money Market


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Capital Market

1. Equity Market

1. Primary market IPO , Private Investment Domestic/

international

2. Secondary market NSE, BSE, Regional Stock Exchanges

3. Derivatives Market- Forward, Future, Options, Swap

2. Debt Market Bond, Government Security


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Money Market

Treasury Bills

Commercial Bills

Certificate of Deposits

Call money market


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Financial Services

Credit rating

Factoring

Merchant Banking Leasing

Hire purchase

Portfolio Management

Underwriting


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Basics Finance

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