IT Tools Enhanced Sessions

Managing Finance

Role and Responsibilities of a

FINANCE MANAGER

How much monetary resources are to be arranged for which are all projects and how and when to arrange it, are often decided by a finance manager. Allocation of the available or acquired money in profitable business activities is the responsibility of a finance manager. So in any industry the FM plays an important role.

A FM must be having a clear understanding about the financial aspirations of his organization and the manners through which it’s going to accomplish those goals. The financial environment is often susceptible to even the minute changes in the society. So information about each socially relevant incident and its possible repercussions in the financial scenario becomes really important. No business organization thus can play effectively without the services of a professional finance manager.

In most organizations important Financial Decisions are part of the corporate decisions. The Financial Manager may form a part of the body which arrives at these decisions. He is ascribed duties of submitting a plan as to how to arrange funds, how much and through what means, to deploy on what projects etc. by the top management. FM will have to be a part of the three main aspects of financial decision making viz: Investment Decisions, Financing Decisions and Dividend Policy Decisions.

We can discuss some of the important terminologies of financial management now.

Decisions concerning the financial matters of a business organization are called FINANCIAL DECISIONS.

The total activity of deciding the magnitude of assets to be held by a firm, the proportional constitution of these assets, and the possible risks involved as perceived by an investor etc is termed as INVESTMENT DECISIONS.

Investment Decisions are of two types: LONG TERM INVESTMENT DECISIONS and SHOT TERM INVESTMENT DECISIONS.

Deciding on the size of the capital to be collected and the ways of deploying it on various projects are examples of long term financial decisions.

Short term financial decisions include allocation of funds on short term investments.

The Decisions arrived upon by a FM from time to time on the ideal financial mix to maximize the returns from a business venture is called FINANCING DECISIONS.

How to raise capital required, when, and through what means etc are financing decisions.

Disbursement decisions of the profits or business earnings to all those who are party to it is DIVIDEND POLICY DECISIONS.

It’s concerned with the sharing of profits to all concerned in its due proportions. It should be a balanced decision taking into consideration the aspirations of the investors, company’s hopes on gain and growth, its liquidity position, stability and debt & repayment conditions.

Learning Financial Managment Made Easy

SOME TIPS TO LEARN IT A BIT EASILY (Contd….)

You have now completed the initial stage of learning the subject successfully. Now we can go to the next stage of our learning.

In most of the units of the study material there will be self assessment questions. Read it and prepare a pre preparation note on the possible answers to these questions.

Take the question paper of the Tutor Marked Assignments, after that. Read the questions carefully. Think of its possible answers too. Then select the questions which you are going to answer wherever options are available, and wherever options are not available select all the questions. Make a priority list, to which to prepare the answer first and to which next.

After that read the first question and find out the portion in the book which deals with this question. Read that portion carefully and prepare the answer for the question. Find out the cited reference books and refer to the relevant portions in it to better your answer. In this way prepare the answer for all the questions in the assignments.

Submit the answers for appraisal in its prescribed style and manner to the authorities concerned. After you get it back from your counselors or study centre read it again. If you have any doubts on the marks or grades ascribed to each question or in the aggregate try to discuss it with the concerned people. After all these, reread the answers, make necessary corrections wherever required and publish it in your blog.

Ask your colleagues to visit your blog read each article and to comment on it. Similarly you can also visit the blogs of your friends and comment on their works. Be careful; make only constructive opinions on them.

Whenever you read any article or book or visit any website relevant in this connection try to make apt notes on what you read. You can seek help from subject experts if available and post it in your blog after editing the notes carefully.

Send mails to your colleagues and friends about your new posts and ask them to read the article and comment on it.

The assignment part is thus over. You now have to prepare for the term end examinations. Start reading the study material from the beginning. Complete each booklet in its prescribed time. Think about the additional information you have received by reading it. Again prepare notes on it and share it with your friends and colleagues.

Another activity you can undertake after reading all the study materials is to refer to the books prescribed for further readings. Buy, borrow or download relevant books. Read those well and share the knowledge you have gained from them.

Try to download previous years’ question papers and start answering the questions one by one. Since it has to be a participative affair, share your works with your colleagues through the internet.

You had made a pre preparation note on the possible answers of the self assessment questions. Now you have completed reading the study material. Read the PPN once again and rewrite it incorporating the necessary additions. Post the rewritten material in your blog.

It will be possible for your academic counselors also to participate in your studious efforts if you do it in this manner. Discussion forums or Webinars can be conducted if you find it useful. You can also go for online tuitions if available affordably. Contacts with other students of the same subject in other places of the world and of other universities can also established for mutual benefits.

Tell me which subject cannot be learned in a better manner in this manner.

IT Enhaced Learning

SOME TIPS TO LEARN THE SUBJECT A BIT EASILY



We have discussed these techniques in our last session. Anyway I would like to repeat it hereby for the benefit of others.

First you take out the whole bunch of the study materials and place it before you in its right order. For example, we will begin with MS 42 Capital Investment and Financial Decisions.

Place the books in the following order:

Overview of Financial Decisions
Investment Decisions Under Certainty
Investment Decisions Under Uncertainty
Financing Decisions
Strategic Financing Decisions

Place the books in such an order that you see all the titles printed on the bottom side of the booklets. First book pushed up a little and the book below it a little down the next book a little more down and so on , so that you can see all the tiles in one glance.

After you have finished arranging the books in the said order, look at the block of books carefully read the titles. Close your eyes and think about studying and completing all these books. A slight ‘fear of work’ may conquer you at this moment. Console yourself.

And after you have consoled yourself please sit idle for another minute without thinking of anything. Keep your mind as blank as possible. Your mind may go away from you, but catch him back and hold him to the blank mode of the mind. It may not be possible at the first trial, but keep trying, it’ll soon be possible to sit in the blank mode for as much time as you desire.

After two or three minutes while you are in the blank mode of the mind, come back slowly to the normal mode of your mind, where the process of thought begins again.

It should be akin to a sunrise, your mind comes up to the normal mode after a restart of the system, made more powerful and receptive.

Now think of read the captions on the cover page of the first booklet. Keep all the other four aside but not away from your sight, normally stacked.

Try to avoid all other thoughts as far as possible. Keep away from all possible distractions. Think consciously that you are going to study the book “Overview of Financial Decisions”.

Open the cover page and read the content of Block 1 given in the first page of the book:

Unit 1: Nature of Long Term Financial Decisions

Unit 2: Cost of Capital

Unit 3: Capital Structure Decisions

Read these words and try to recollect all that you know about these, right now, before doing the topic.

Please take a book and write down whatever you know about the topics i.e. Unit 1: Nature of Long Term Financial Decisions, Unit 2: Cost of Capital and Unit 3: Capital Structure Decisions

Alternatively you can type it in a computer using Microsoft Word or Notepad. Save it in a directory called IGNOU and create a Sub Directory called MS 42. Go to another sub-sub directory: “Overview of Financial Decisions” and save the file in it.

Now turn the page and go to page 3 and you’ll find Block 1 Capital Investment and Financial Decisions.

Read the four paragraphs below that carefully. Now you will get a rough idea about what you are going to study. Compare the new ideas gained with the notions you already had about these subjects. If required go back to the notes you have made and read it again. Incorporate corrections if you deem it fit to. Save it again.

Go to the 5th page then.

NATURE OF LONG TERM FINANCIAL DECISIONS.

Read the whole page down from the Objectives to 1.12 Answers, carefully at the same time fast. This will again give you a clearer understanding about what you are going to learn. Turn the page now to the 6th one. Read the Introduction carefully. Repeat if necessary. Think for a while what you have understood, and correlate the facts with your previous notions on the subject. Make correction if needed.

After this turning page by page and glancing through them, go to the 20th page. Read the Summary carefully and repeat if necessary. Stop for a while, think for a while and go to the Key Words. Read all the Key words carefully two or three times and try to remember everything and retain everything in your mind.





I will tell you something about the techniques of Memory Power Development. These techniques were envisaged and used successfully by the world famous memory trainer Harry Lorrayne.

Theory of Association is a technique use to empower the memory. An event or term to be remembered is associated in our mind to some strange, bizarre or occult images. The first term mentioned in the ‘Keys words’ is ‘annuity’

Annuity means an equalized stream of cash flows over a period of time.

To make you remember and recollect what is meant by the term Annuity in FM (Financial Management). Visualize you sitting in toilet. Think of your anus and a continuous flow of stool from your anus- an equalized stream of flow for a period of time. Correlate the event with ‘annuity’. Whenever you think of ‘annuity’ this bizarre image will pass through your mind and you will surely be reminded of the meaning of the term ‘annuity’. Try the same technique or any other befitting technique with other terms also. Somehow remember what you have read.

Now again think of what new knowledge about the subject in hand, have you gained. Correlate the newly gained ideas with your previous notions on the subject. Read your notes which you made previously on this. Make corrections if necessary. Save it.

Blog

Create a blog on your studious endeavour and publish the note you have made in the blog. Send a mail to all your colleagues and friends asking them to visit your blog. Request them to record their opinion also.

After you finish this go to the self assessment questions and read and prepare answers for these questions. I request you to publish these also in your blog. Visit the blogs of your colleagues and compare your answer with others. Chat with them and clarify your doubts.

Further Readings is another helpful column in our book. Try to get as many books mentioned in this column. Identify the necessary topics and read it carefully, of course making notes on it. Share the knowledge you gain with your friends and teachers. Try free downloads, to save time and money.

Repeat the same process with Unit 2: Cost of Capital and Unit 3: Capital Structure Decisions or with any other blocks you have to study. Please make a copy on alternative retrieval system also, to manage contingencies.

Finance Management

INTRODUCTION


The first and foremost requisite of any business is CAPITAL. Money is required for all its activities.

To start and run any business we need money, along with men and material.

Effectively managing these precious resources is essential for the effective conduct of any business.

How can we find or arrange money.

Owners’ own contribution is the first option open before us. Normally small and micro business ventures are started with owners’ own contribution. Most of them run with that and never goes beyond that.

When the contribution of the business owner becomes insufficient, for the proper conduct of the business or to meet the excess demand of resources for the proposed expansions, we think of borrowing. We may borrow from other individuals, other business organizations or from banks in private or public sector.

We raise the required capital by inviting and accepting equity shares from other individuals. Debt or equity instruments are the available means to raise the required capital.

In debt we don’t share the ownership of the business organization, and the person/s who have contributed the money are not liable for the liabilities or loses incurred by the business during its conduct.

In equity participation we are sharing the ownership of he business organization in accordance with the proportion of the participation. The return on investments will be in accordance to the business performance and not fixed prior to the investment as in the case of debts.

From the various options available a finance manager/entrepreneur has to arrive at the right decision as to how to arrange, how much and when to arrange the capital to optimize the return from the business activities.

Capital has its own cost. The income that can be derived if the owner invests the money on some other business or activities is the COST OF CAPITAL in the case capital arranged as Owners’ own contribution.

Dividends or other disbursement given away to investors along with the other expenses incurred in rising and maintaining equity shares is the cost of capital in the case of equity instruments.

Investments Decisions, Finance Decisions, and Dividend Policy Decisions are areas where a Finance Manager has to use all his intellectual resources to arrive at the apt course of action and that’s what FINANCE MANAGEMENT is concerned all about.