Financial Management. Presentation at a students engagement seminar on 3 rd February 2018 at Imperial Royale Hotel Kampala.

Transcription

1 Financial Management Presentation at a students engagement seminar on 3 rd February 2018 at Imperial Royale Hotel Kampala.

2 Introduction Due to poor performances in some papers, numerous recommendations have been suggested on how students should prepare for exams in order to improve performance. One of the recommendations was to interact with students and we share the experiences.

3 Outline of the presentation 1. Meaning of financial management 2. Objectives of financial management 3. Syllabus 4. Relevancy of financial management paper 10 in day to day life 5. Common causes of student failure 6. Necessary preparation needs for one to pass 7. Conclusion

4 Financial Management Financial management is an act of ensuring that finances of the organization achieve its intended objectives. Financial management has two aspects: - Financial planning Financial control Planning decisions are aimed at ensuring that enough funding is available at the right time to meet the needs of the organization for short term, medium and long term capital requirements. Financial control is concerned with control of the obtained funds.

5 Objectives of Financial Management To ensure regular and adequate supply of funds to the organization. To ensure adequate returns to the stakeholders. To ensure optimum funds utilization i.e. funds should be invested in safe ventures so that adequate rate of return can be achieved. To plan a sound capital structure-there should be sound and fair composition of capital. To manage financial risks to an acceptable level. To provide information for decision making.

6 Financial Planning Financial Planning is process of framing objectives, policies, procedures, programs and budgets regarding the financial activities of an organization. It aims at having effective and adequate financial and investment policies.

7 Importance of Financial Planning Financial Planning helps to ensure adequate funds are sourced. Financial Planning helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained. Financial Planning ensures that the suppliers of funds can easily invest in organizations which exercise financial planning. Financial Planning helps in making growth and expansion programs which helps in long-run survival of the organization. Financial Planning helps in reducing the uncertainties which can be a hindrance to growth of the company.

8 Financial control and its importance The regulation of organization s activities so that targeted performance remains within acceptable limits. Importance of financial control Provides organizations with indications of how well they are performing in relation to their goals. Provides a mechanism for adjusting performance to keep organizations moving in the right direction.

9 P10- FM SYLLABUS Overall aim To develop knowledge and understanding of the basic financial management principles to aid financial decision making. Level of assessment The examination will be centered on the basics of financial management aimed at testing knowledge and comprehension, as well as application and analysis.

10 Detailed syllabus 1. Introduction 2. Finance function and environment 3. Essential concepts of finance 4. Capital investment appraisal 5. Financial markets and securities exchange 6. Working capital management 7. Financial analysis and control 8. Cost of capital and capital structure 9. Ethical issues

11 Relevancy of financial management Understanding corporate financial management helps one to understand personal finance basics. Understanding corporate financial management helps one to understand personal financial planning. Corporate finance financial management will help one to understand how to avoid/eliminate debt. Understanding corporate financial management will help you to pass on knowledge to future generations. Corporate finance will help you understand the financial opportunities available to you today.

12 Importance of personal finance Personal finance enables one to improve the standard of living, which leads to good health and financial stress reduces considerably. Besides that, it also enables the individual to take better financial decision which reduces poverty, debts and increases savings and investments (Bimal Bhatt, 2011)

13 Relevancy cont d Finance function Helps in understanding the interests of stakeholders and their power. This helps you to know how to treat them. Ethics; o Helps to understand the importance of ethics in business. Lack of ethics in business hinders its growth. The reputation of a business from the surrounding community, other businesses and individual investors is paramount in determining whether a company is a worthwhile investment. o Helps you understand effects of money laundering Risk ; Helps you in understanding how to manage risk like financing risk, interest risk, foreign exchange risk etc

14 Relevancy cont d Capital budgeting; Helps you in understanding how to identify different investment opportunities. E.g. stocks, real estates, bonds and other securities, companies and sole proprietorships. Helps in understanding how to evaluate the viability of different investment opportunities. Helps you with knowledge to understand leasing agreements.

15 Relevancy cont d Financial analysis; Provides you with ability to analyze the profitability of an investment opportunity e.g. ROI, ROCE Provides you with ability to analyze the sustainability of the project using investor ratios Cost of capital; Helps you to understand different sources of funds. Provides you with ability to analyze costs of borrowing. Provides you with ability to negotiate for better rates Provides you with ability to read and understand the terms and conditions of the loan. Provides you with ability to understand the amortization schedule, the ability and confidence to demand for it.

16 Relevancy cont d Debt; Helps you to understand credit administration How to negotiate for loans, where to source for credit. Advantages and disadvantages of debt; The question of debt capacity Helps you understand the loan agreement

17 Relevancy cont d Equity; Helps you to understand the advantages of investing stocks. Helps you to understand right issues, stock splits undertaken by listed companies Helps you to understand the financing mix Helps you to understand operations of capital markets Helps you to understand financial markets including forex markets Helps you to understand unit trusts. Helps you in understanding initial public offering (IPO)

18 Relevancy cont d Working capital management; Helps you to understand how cash is managed. Helps you to understand how to prepare a budget and how to spend according to budget. Helps you to learn how to forecast your cash flows Helps you to understand how you can factor your receivables Helps you understand how carry invoice discounting Helps you to understand how you can enjoy cash discount, early payment discounts etc. Helps in understanding cash float.

19 Relevancy cont d Helps in understanding cash remittances e.g. Mobile money, Electronic Money transfers, western Unions, RTGS, Easy money etc. Helps in understanding liquidity management Helps you to understand effects of over capitalization Helps you to understand effects over trading Helps you to understand the effects of undercapitalization

20 Common causes of student failure Perceiving the subject as inapplicable in real life. Assuming that knowledge acquired when doing other courses is enough to pass. Lack of adequate preparation. Failure to cover the whole syllabus. Failure or refusal to join discussion groups. Using outdated information (Reading materials and textbooks). Failure to grasp the principles of the subjects. Poor hand writing. Verbosity. Failure to write question numbers. Doing a compulsory number last.

21 Causes of failure cont d Poor time management. Misinterpreting questions. Lack of knowledge management. on the basic concepts of financial Failure to compute and get right answers Failure to analyse the theory questions. Lack of knowledge in current affairs. Importing information from the case study and failure to professionally analyse it. Failure to answer the question set. Spotting the examiner

22 Necessary preparation a student needs Attend lectures in order to get current information. Have the basic concepts of financial management at your fingertips Read text books. Students only rely on lecturers hand outs which are summarized. Use current reading materials/ text books. Try as much as possible to cover the whole syllabus. Avoid spot work. Join discussion groups. Spare time to read the subject. Consult the experts Read to understand and not to just pass.

23 Preparation cont d Don t give up when you fail first or second time. Students need to buy copies of reading materials prepared by ICPAU to get principles of the paper. Try to write properly Avoid verbosity. Be brief, precise and to the point

24 Conclusion In conclusion, for one to pass this paper, he or she needs to attend lectures regardless of whether he or she had ever done such a paper in other courses. Lack of enough preparedness is causing massive failures. Preparedness should not only be limited to reading to pass but reading to understand because you are being prepared to be an adviser in finance matters. So this requires one to read according to the syllabus and aiming at covering all aspects of the syllabus. Knowledge acquired in corporate financial management should be applied in managing personal finances. It is very important for every individual to plan and manage their personal finances in order to lead a happy live. It is also important for every individual to have personal financial plan in order to meet their financial goals and obligation, help to retire in comfort, achieve financial freedom, make rational financial decisions and take advantage of every financial opportunity. We are all not born with this knowledge, so it should be everyone s responsibility to learn the strategies to plan and manage our personal financial as this does not only help to lead us to a happy life but also contribute to the development of the nation in the long run.

25 END THANK YOU FOR LISTENING TO ME