Financial Management Objectives

University:
Stanford University
Course:
FINANCE 201 | Managerial Finance
Academic year:

2023
Views:

475

Pages:

3
Author:

kenzo v

Course : Managerial Finance Lecture : Marc Credit Hours : 3 Credits Semester Sessions : 3 Semester, 2021/2022 Session Prepared By : Kenzo LECTURE NOTES Financial Management Objectives Viewed from a financial management perspective, the objectives company is to maximize company value. Objective This is considered better than maximizing advantage, because the latter has Some weaknesses include: 1. Short term in nature. A company that aims to maximize Profits can be achieved by reducing costs as low as possible. For this reason the company can ignore it depreciation costs, not carrying ou maintenance on costs, etc. Companies can also hold interesting promotions, but it is not realistic so in the short term sales may increase. If sales increase and costs are reduced so that in this way there is a profit maximum can be achieved, but in the long term Such a company will face a lot difficulty. 2. Ignoring the Time Value of Money. The large profits obtained will be insignificant if you don't consider the time/when to profit is obtained. High – low company value for companies companies that have “go public” depend on high – the low price of the company's shares on the capital market. Theoretically, share prices can be found by multiplying between Price Earning Ratio and Earning per-share (P/E Ratio x EPS). Meanwhile, for companies that have not yet "go-public" Company value is determined by Earnings per-share (EPS). Financial Management Function In relation to achieving goals company, then the functions that must be carried out by financial managers are as follows: 1. Business Activity Financing Function (Financial Function). 2. Capital Investment Function (Investment Function). 3. Dividend Function. In order to solve problems Therefore, there needs to be policies directed towards company goals. These policies are 1. Financial/Spending Policy In this policy financial managers are required to planning, determining and obtaining funds from the most profitable sources for the company both in terms of the amount, time period, usage and costs. 2. Investment Policy This policy concerns decision making for allocate funds into appropriate forms of assets with good and correct patterns of spending assets, so that a financing combination is obtained mix) which will create the most financial structure optimal. 3. Dividend Policy. This policy relates to decisions about how and how much of the profit is obtained the company will be distributed as dividends, so prosperity of company owners/shareholders can be secured.