FINANCIAL MANAGEMENT MPMC
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Transcript of FINANCIAL MANAGEMENT MPMC
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0011 0010 1010 1101 0001 0100 1011
FINANCIAL MANAGEMENT
http://search.rediff.com/imgsrch/preview.php?story-url=http%3A%2F%2Fwww.financeinfoline.com%2F&img-url=http%3A%2F%2Fwww.financeinfoline.com%2Fimages%2Fpersonal-finance.jpg&search-keyword=personal%2520finance&img-size=6k&img-height=139&img-width=145&thumb-url=http%3A%2F%2Fimages.picsearch.rediff.com%2Fis%3FtTw7pGsCz92fTRb0uiRKNIApTT5-gKX4nYvRwpz8lCk&addr-url=http%253A%252F%252Fsearch.rediff.com%252Fimgsrch%252Fdefault.php%253Fsrc%253DISRelQ%2526MT%253DPersonal%252BFinance%2526posn%253D1%2526originalq%253Dhollywood&mpageno=4&mrdtotal=22&mpictotal=18202&imgsize=&desksize=&pos=14&link=thumbhttp://search.rediff.com/imgsrch/preview.php?story-url=http%3A%2F%2Fwww.financeinfoline.com%2F&img-url=http%3A%2F%2Fwww.financeinfoline.com%2Fimages%2Fpersonal-finance.jpg&search-keyword=personal%2520finance&img-size=6k&img-height=139&img-width=145&thumb-url=http%3A%2F%2Fimages.picsearch.rediff.com%2Fis%3FtTw7pGsCz92fTRb0uiRKNIApTT5-gKX4nYvRwpz8lCk&addr-url=http%253A%252F%252Fsearch.rediff.com%252Fimgsrch%252Fdefault.php%253Fsrc%253DISRelQ%2526MT%253DPersonal%252BFinance%2526posn%253D1%2526originalq%253Dhollywood&mpageno=4&mrdtotal=22&mpictotal=18202&imgsize=&desksize=&pos=14&link=thumb -
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PROBLEMS BEFORE
MAHAVITARAN Shortage of Power and Load Shedding of more than 4000 MW
High Distribution Losses (31.14% in 04-05)
Large Amount of Outstanding Arrears (Rs. 8130.61 Cr.)
Highly Deteriorated Distribution Infrastructure
Large Pending Applications for Ag Connections (1.7 Lakhs Paid App)
Power Purchase Cost has increased from Rs 10707 Crore in FY 04 to
Rs 16335 Crore in FY 07 The average cost of supply (ACOS) has increased from Rs. 3.07 per
kWh to Rs. 4.22 per kWh.
The average increase in tariff works out to 28.8%
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So the analysis simply states two main aspects of financial
management like procurement of funds and an effective use of funds
to achieve business objectives.
Financial Management
procurement of fundsprocurement of funds
effective use of fundseffective use of funds
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PROCUREMENT OF
FUNDS:As funds can be obtained from different sources so procurement of
funds is considered as an important problem of business concerns.
Funds procured from different sources have different characteristics
in terms of risk, cost and control.
Funds issued by the issue of equity shares are the best from risk pointof view for the company as there is no question of repayment of equity
capital except when the company is under liquidation.
From the cost point of view equity capital is most expensive source of
funds as dividend expectations of shareholders are normally higher
than prevalent interest rates.
Financial management constitutes risk, cost and control. The cost of
funds should be at minimum for a proper balancing of risk and
control.
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UTILIZATION OF FUNDS:
Effective utilization of funds as an important aspect of financial
management avoids the situations where funds are either kept idle
or proper uses are not being made. Funds procured involve a
certain cost and risk. If the funds are not used properly then
running business will be too difficult. In case of dividend
decisions we also consider this. So it is crucial to employ the
funds properly and profitably.
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SCOPE OF FINANCIAL
MANAGEMENTA sound financial management is essential in all types of
organizations whether it may be profit or non-profit. Financial
management is essential in a planned Economy as well as in a
capitalist set-up as it involves efficient use of the resources.
From time to time it is seen that many firms have been liquidated
not because their technology was obsolete or because their
products were not in demand or their labour was not skilled and
motivated but there was a complete mismanagement of financial
affairs. Even in a boom period, when a company make high profits
there is also a fear of liquidation because of bad financial
management.
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Contd..
Financial management optimizes the output from the giveninput of funds. In the country like India where resources are scarce
and the demand for funds are many, the need of proper financial
management is required. In case of newly started companies with a
high growth rate it is more important to have sound financial
management since finance alone guarantees their survival.
Financial management is very important in case of non-profit
organizations, which do not pay adequate attentions to financial
management.
How ever a sound system of financial management has to be
cultivated among bureaucrats, administrators, engineers,
educationalists and public at a large.
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Risk management is the systematic process of identifying, analyzing, and
responding to project risk. It includes maximizing the probability andconsequences of positive events and minimizing the probability andconsequences of adverse events to project objectives. It includes:
Risk management planning deciding how to approach and plan the risk
management activities for a project.
Risk identification determining which risks might affect theproject and documenting theircharacteristics.
Qualitative risk analysis performing a qualitative analysis of risksand conditions to prioritize theireffects on project objectives.
Quantitative risk analysis measuring the probability and
consequences of risks and estimating their
implications for project objectives. Risk response planning developing procedures and techniques to
enhance opportunities and reduce threatsfrom risk to the projects objectives.
Risk monitoring and control monitoring residual risks, identifying newrisks, executing risk reduction plans, andevaluating their effectiveness throughout
WHAT IS RISK MANAGEMENT?
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FINANCIAL RESTRUCTURING
PLAN Balance sheet restructuring:-
(i) Adjustment of State Government loans against subsidy
receivables from Government
(ii) Recognition and treatment of unfunded staff terminalliabilities
Transition period assistance, including equity support for
investment
Business plan for turnaround
Tariff rationalisation
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Contd..
Efficiency improvement :-
T&D Loss Reduction
Energy Audit
Consumer Metering
Collection Efficiency
Investment Plan
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BUDGET CYCLE
Preparation ofBudget
Authorization of Budget
Execution ofBudget
ExpenditureAccounts
Audit
Feedback
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FINANCIAL ANALYSIS
Organization
Specific EnvironmentIndustry-Competitors
Substitute
ProductsBargaini
ngPower ofSupplier
s
Bargaining
Power ofBuyers
Potenti
alEntrant
s
CurrentRivalry
GeneralEnvironment
Technologi
cal
Political-Legal
Sociocultural
Demographic
Economi
c
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FINANCIAL CONTROL
Financial control is exercised through a framework, consisting of the
following elements: -
i. Principles
ii. Procedures
iii. Instruments
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PRINCIPLES
In line with the broad principles, there are separate procedures fordifferent types of expenditure, such as Establishment Charges, TA,
Medical Charges, Purchases and Repairs of Durable Goods, and
Commodities & Services. Separate Rules have been framed to regulate
these different types of expenditure. Examples are FR&SR, TA Rules,
NWFP Medical Attendance Rules and Leave Rules etc
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PROCEDURES
In line with the broad principles, there are separate procedures fordifferent types of expenditure, such as Establishment Charges, TA,
Medical Charges, Purchases and Repairs of Durable Goods, and
Commodities & Services. Separate Rules have been framed to regulate
these different types of expenditure. Examples TA Rules, Medical
Attendance Rules and Leave Rules etc.
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INSTRUMENTS
Different Types of Forms, Bills and the Checklists used for drawl of
different types of expenditure. For example:
Manual and Computerized Pay Rolls are used for drawing Salary and
Leave Salary
TA/DA is drawn through TA Bills.
Contingent Expenditure is drawn through Contingent Bills