Financial Management

Dr. Mamdouh Abdelmoula

‫ ممدوح عبدالمولى محمد عبدالمولى‬.‫د‬
Lecture 01
Course Objective
This course aims at providing students with an
1.Gain understanding of making investment and
financial decisions,
2.Identifying the tools used in the evaluation of
investment proposals,
3.Displays the company's capital structure concept,
4.Conduct organizational financial analysis,
5.Prepare a business plans and feasibility studies.
 Course Objective

Think like

Financial Manager
Accountant Manager vs Finance
Manager
 Finance Manager vs Accountant Manager
• Finance Manager is responsible for overseeing the
financial operations of a business, including budgeting,
forecasting, cash flow management, and financial
analysis. They are also responsible for developing
strategies to improve the financial performance of the
organization.
 Finance Manager vs Accountant Manager
• Accountant Manager is responsible for managing the
day-to-day accounting activities of an organization. This
includes preparing and reviewing financial statements,
managing accounts payable and receivable, reconciling
bank statements, and ensuring compliance with
applicable laws and regulations.

They also provide advice on tax planning and other

financial matters.
Think like Financial Manager
Thinking like a financial manager requires a
combination of knowledge, experience, and a
strategic mindset.

Here are some tips to help you think like a

financial manager:
Think like Financial Manager
1. Consider the bigger picture:

Financial managers need to think beyond the

day-to-day operations and consider the long-
term financial goals and objectives of the
organization. They must understand the overall
strategy of the organization and align financial
decisions with its mission and vision.
Think like Financial Manager
2. Manage risk:

Financial managers must identify, assess, and

manage financial risks that could negatively
impact the organization's financial
performance. They must weigh the potential
benefits and drawbacks of each financial
decision and consider the impact of uncertainty
on the organization's finances.
Think like Financial Manager
3. Make informed decisions:
Financial managers must identify, assess, and
manage financial risks that could negatively
impact the organization's financial performance.
They must weigh the potential benefits and
drawbacks of each financial decision and consider
the impact of uncertainty on the organization's
finances.
based on relevant data and information
Think like Financial Manager
4. Be proactive:

Financial managers must be proactive in their

approach to financial management. They must
anticipate potential financial issues and
develop contingency plans to mitigate risks and
ensure the organization's financial stability..

Keep future in mind

Think like Financial Manager
5. Continuously evaluate performance:

Financial managers must continuously evaluate

the organization's financial performance and
adjust strategies as needed. They must
regularly review financial reports, budgets, and
investment performance data to identify trends
and make informed decisions that will improve
the organization's financial position.
Financial Manager skills:
1. Strategic Thinking
2. Analytical Skills
3. Ethical behavior
4. Problem solving
5. Leadership and communication
6. Adaptability
7. Attention to detail
8. Technical proficiency and Practical Experience
 Course Content

Total risk of
Introduction to
Role of the financial investment Financial analysis -
financial
manager alternatives and financial ratios.
management
CAPM

Financial analysis -
The financial
Preparation and Different financing
structure and its Cost of money.
analysis of the cash methods
cost
flow statement.

Net present value,

payback period and Working Capital
rate of return on Management
investment.
Introduction to
financial management
Definitions of Financial Management
• Financial Management is an area of financial decision making, harmonizing
individual motives and enterprise goals.
• Financial Management is the application of the planning and controlling
functions to the finance function.
• Financial Management is concerned with the effective use of an economic
resource namely capital fund.
• Financial Management is about determining acquisition, allocation,
understanding and utilization of financial resources usually in the aim of
achieving of some particular goals of objective.
 Financial Management

Financial management is the process of managing an

organization's monetary resources to achieve its goals
and objectives. It involves the planning, organizing,
directing and controlling of financial resources
to minimize risk and maximize return.
Functions
of Financial Management
Financial management is involves making decisions about
how to acquire, use, and dispose of funds in order to
maximize the organization’s return on investment.

• Financial management functions can be divided into

three main categories:

Decision-
Planning Controlling
making
Functions of Financial Management
1- Planning
The first function of financial management is planning. This involves:
• Setting goals for the organization and
• Developing strategies to achieve them.
For example, a company may set a goal of increasing its profits by 10%
over the next year. To achieve this goal, it must develop a plan that
includes budgeting, forecasting cash flows, and setting up performance
metrics to measure progress.
Functions of Financial Management
2- Controlling
The second function of financial management is controlling. This involves:
• Monitoring actual performance against planned objectives and
• Taking corrective action if necessary.
For example, if actual profits are lower than expected due to unexpected
costs or changes in market conditions, the company may need to adjust
its budget or revise its plans in order to reach its goals.
Functions of Financial Management
3- Decision-Making
The third function of financial management is decision-making. This involves:
• Evaluating various options and
• Choosing the best course of action based on available information and
resources.
For example, a company may need to decide whether to invest in new
equipment or hire additional staff in order to increase production capacity
and improve profitability.
Scope of Financial
Management

The scope of financial management

includes all the activities related to
managing an organization's financial
resources in an efficient and effective
manner, It covers several key areas
 Scope of Financial Management

1. Planning, 4. Working
2. Capital 3. Capital
budgeting and capital
structure budgeting
forecasting management

5. Cash and
6. Risk 7. Investment 8. Financial
treasury
management management reporting
management
Scope of Financial Management
1) Planning, Budgeting and
Forecasting

Financial management plays a crucial role in planning, budgeting, and

forecasting by providing the information and tools necessary to make
informed decisions. By using financial management, companies can:

• Set realistic goals,

• Allocate resources efficiently, and

• Make accurate predictions about future financial performance

Scope of Financial Management
1) Planning, Budgeting and
Forecasting
Planning: Financial management helps in planning by providing a clear understanding
of the company's financial situation. This information is essential in setting short and
long-term goals and objectives, determining the resources required to achieve these
goals, and developing strategies to overcome financial challenges.

For example, if a company wants to expand into a new market, financial management
can help by conducting a cost-benefit analysis to determine if the investment is
feasible. This analysis takes into account the cost of entering the new market, the
potential revenue, and the risks involved.
Scope of Financial Management
1) Planning, Budgeting and
Forecasting
Budgeting: Budgeting is an important aspect of financial management, and it helps in
determining the resources required to achieve the goals set in the planning stage.
A budget is a financial plan that outlines the expected income and expenses for a
specific period, usually a year.

For example, if a company wants to increase its sales, it can create a budget that
includes the cost of marketing and advertising campaigns, the cost of hiring new sales
staff, and the expected increase in revenue
Scope of Financial Management
1) Planning, Budgeting and
Forecasting
Forecasting: Forecasting is the process of estimating future financial performance
based on past performance and current market conditions. Financial management
helps in forecasting by providing tools and information to make accurate predictions
about future revenue, expenses, and cash flow.

For example, if a company wants to determine the potential revenue from a new
product launch, it can use historical data, market research, and industry trends to
create a sales forecast. This information is critical in making decisions about
production levels, staffing, and marketing campaigns.
Scope of Financial Management
2) Capital Structure

Capital structure: This involves determining the optimal mix of debt and
equity to finance an organization's operations and growth, Financial helps to
inform decisions about how much debt and equity should be used to finance
the operations of the business, Financial management plays a major role in
determining the company’s cost of capital.

For example, a company may choose to issue bonds or take out a loan to
finance the construction of a new plant.
Liability

Liability accounts record any Sources of funds employed in the

business, in addition to Monies for which the business is liable.

Liability

Equity Loans Payables

Capital Employed
Scope of Financial Management
3) Capital Budgeting

Capital budgeting: This involves evaluating and selecting long-term investment

opportunities, such as new product lines or acquisitions.

For example, a company may conduct a cost-benefit analysis to determine whether

to invest in a new technology
Scope of Financial Management
4) Working Capital Management

Working Capital Management: Refers to the process of managing a company's short-term assets
and liabilities to ensure it has adequate resources to meet its ongoing operational needs; Financial
management and working capital management are intertwined, and financial management
decisions can have a significant impact on a company's ability to manage its short-term assets and
liabilities effectively.

For example, if a financial manager decides to invest in long-term assets, such as real estate or
equipment, this may reduce the amount of funds available for working capital, potentially leading
to a cash flow shortage, on the other hand, if the financial manager decides to maintain a high
level of liquid assets, such as cash or short-term investments, this may increase the funds available
for working capital and provide a cushion for meeting short-term obligations.
Scope of Financial Management
5) Cash and Treasury management

Cash and Treasury management: Cash and treasury management, involves managing a
company's cash inflows and outflows, ensuring it has sufficient liquidity to meet its short-
term obligations, and optimizing its use of cash. This includes activities such as cash
forecasting, bank relationship management, and the management of short-term
investments.
Scope of Financial Management
5) Cash and Treasury management

For example, A company is planning to expand its operations and needs to raise funds for
this purpose. The financial management team decides to issue bonds to raise the funds
required for expansion. This decision affects cash and treasury management as the funds
raised from the bond issuance will be used to meet the company's cash requirements for
the expansion, To ensure that the company has sufficient liquidity to meet its short-term
obligations, the cash and treasury management team will need to forecast the company's
cash inflows and outflows, including the cash inflows from the bond issuance. They will also
need to manage the company's cash balances, ensuring that the funds are invested in
short-term investments to maximize returns while maintaining a high level of liquidity.
 Cash Management VS
Treasury Management
Cash management and treasury management
are related but distinct concepts in financial
management.
• Cash management involves optimizing the use of cash by
managing a company's cash inflows and outflows to
ensure it has sufficient liquidity for its short-term
obligations.

• Treasury management, on the other hand, is a broader

concept that includes cash management and involves
making decisions on how to allocate funds and manage
investments, debts, and other financial assets to achieve
the company's financial goals and objectives.
Scope of Financial Management
6) Risk management

Risk management: Risk management is a critical component of financial management. It involves identifying,

assessing, and prioritizing potential risks that could impact the organization's financial performance and taking steps to

mitigate or manage those risks.

Effective risk management requires a thorough understanding of the organization's financial position, its goals and

objectives, and the risks that it is exposed to. It also requires regular monitoring and updating to ensure that the

organization is prepared to respond to changes in financial risk and to ensure that it is able to achieve its financial goals

For example, Risk management could include risks such as market volatility, interest rate changes, currency

fluctuations, or changes in regulatory requirements; Financial managers need to continuously monitor and reassess

risks to ensure that the organization's risk management strategies remain effective in protecting the organization's

financial performance
Scope of Financial Management
7) Investment management

Investment management: This involves managing the organization's investments, such

as stocks, bonds, and real estate, to maximize returns and minimize risk.

For example, a company may create a diversified investment portfolio to minimize the
impact of market fluctuations
 Investment management VS
Treasury Management
In some cases, there can be a conflict
between investment management and
treasury management.
• Investment management refers to the process of making
investment decisions and managing investment
portfolios, with the goal of achieving a specific
investment objective, such as maximizing returns or
minimizing risk.

• Treasury management, refers to the management of an

organization's cash and financial resources, with the goal
of optimizing short-term liquidity, managing financial
risks, and ensuring adequate funding for operations.
Scope of Financial Management
8) Financial reporting and analysis

Financial reporting and analysis: This involves preparing and communicating financial
information to stakeholders, including shareholders, creditors, and regulators. For example,

For example, a company may prepare an annual financial report to provide

information on its financial performance and position.
 • Other areas of focus for financial management

Scope of may include financial system and process

Financial management, tax management, and

Managemen compliance management… etc.

t • In summary, the key components of financial

management can vary, but they typically cover
a wide range of responsibilities and functions
that are critical to the financial success of an
organization.