EDABS 202 - CFM - Topic 01 - The Idea of Finance Theory & The Current World of Finance

5/16/21

Conducted by Nadun Kumara 1

TOPIC 01THE IDEA OF FINANCE THEORY & THE CURRENT WORLD OF FINANCE

EDABS 202 – Corporate Financial Management (CFM)

Conducted by Nadun KumaraMBA(USJP), ACMA(UK), CGMA(USA), BA(Hons)(UK), DipPsychOrg(UK)

01.01 – Branches of Accounting & Finance

Management Accounting

Accounting & Finance

Financial Accounting

Financial Management

EDABS 202 - CFM - Topic 01 - The Idea of Finance Theory & The Current World of Finance

5/16/21

Conducted by Nadun Kumara 2

01.02 – What is Financial Management

• FINANCIAL MANAGEMENT – (aka FINANCE)

• This area deals with decisions pertaining to the sourcing anddeployment of an organisation’s funds. It is about creatingshareholder value through prudent management of the financialresources. Financial management also ensures that adequatesystems and controls are in place to ensure that organisationalresources are safeguarded and that they are utilised in the mostappropriate manner.

01.03 – Main Objective of Finance

• Shareholder Wealth Maximisation Defined

• Increasing the flow of dividends to shareholders over a long time period

EDABS 202 - CFM - Topic 01 - The Idea of Finance Theory & The Current World of Finance

5/16/21

Conducted by Nadun Kumara 3

01.03 – Main Objective of Finance (contd.)

• Shareholder Wealth Maximisation vs. Profit Maximisation

• Risk

• Accounting Problems

• Communication

01.04 – Corporate Governance

• Definition – System by which companies are managed andcontrolled.

• There should be a divorce (of ownership and control)

• AGM is held where shareholders appoint Board of Directors

• Principal – Agent theory (Principal is the shareholder and Agent isthe Manager/Director)

EDABS 202 - CFM - Topic 01 - The Idea of Finance Theory & The Current World of Finance

5/16/21

Conducted by Nadun Kumara 4

01.05 – The Role of a Financial Manager

• Financial market management

• Investment management

• Treasury management

• Risk management

01.06 – The Financial System

The Financial System

INSTITUTIONS

Retail Banks Investment Banks

Insurance Funds International Banks

Non-banking Financial

InstitutionsRetirement

Funds

MARKETS

Money Markets FOREX Market

Share Market Bond/Bill Markets

EDABS 202 - CFM - Topic 01 - The Idea of Finance Theory & The Current World of Finance

5/16/21

Conducted by Nadun Kumara 5

END OF TOPIC 01