Finance functions
- 1. SHIVAJI UNIVERSITY KOLHAPUR Name: harshal dagaji patil Present seminar on- Finance Functions Under the Guidance- B . Patil .
- 2. FINANCE FUNCTIONS It may be difficult to separate the finance functions from production, marketing and other functions, but the functions themselves can be readily identified. The functions of raising funds, investing them in assets and distributing returns earned from assets to shareholders are respectively known as financing decision, investment decision and dividend decision.
- 3. Finance functions 1. Long-term asset-mix or investment decision 2.Capital-mix or financing decision 3.Profit allocation or dividend decision 4.Sort-term asset-mix or liquidity decision
- 4. Investment Decision A firm's investment decisions involve capital expenditures. The are, therefore, referred as capital budgeting decisions. A capital budgeting decision involves the decision of allocation of or commitment of funds to long-term assets that would yield benefits (cash flows) in the future. Future benefits of investments are difficult to measure and cannot be predicted with certainty Risk in investment arises because of the uncertain returns.
- 5. Financing Decision Financing decision is the second important function to be performed by the financial manager. Broadly, he or she must decide when, where from and how to acquire funds to meet the firm's investment needs. The central issue before him or her is to determine the appropriate proportion of equity and debt. The mix of debt and equity is known as the firm's capital structure.
- 6. Dividend Decision Dividend decision is the third major financial decision. The financial manager must decide whether the firm should distribute all profits, or retain them, or distribute a portion and retain the balance. The proportion of profits distributed as dividends is called the dividend-payout ratio and the retained portion of profits is known as the retention ratio.
- 7. Liquidity Decision Investment in current assets affects the firm's profitability and liquidity. Lack of liquidity in extreme situations can lead to the firm's insolvency. A conflict exists between profitability and liquidity while managing current assets. If the firm does not invest sufficient funds in current assets, it may become illiquid and therefore, risky. But it would lose profitability as idle current assets would not earn anything.
- 8. Thank you