Hey Guys how are you? I hope you would be fine. Today's Lecures is given below, this lecture is divided into 4 sections.which is explained and Provided by Sir Riaz Ahmed Shaikh.
The Function of Finance:
The risk factor is taken account
Recognises the timing of returns
Pros and Cons of Sole Proprietorship:
Pros:
Limited paperwork and start-up cost
Owner’s full control over the business
Less stringent reporting obligations
An Introuction to Business Finance
Section 1: Role and Scope of Finance
What is Finance?
A term that refers to two main activities;
- The actual process of attracting money.
- The of these funds.
The Function of Finance:
- Analysis
- Decision Making
The Areas of Finance:
Business or Corporate Finance-the firm’s ability to make good finance decisions.
Personal Finance-retirement provision, saving plans etc.
Public Finance-income distribution, stability plans etc.
Finance Vs Accounting:
Financial Accounting concentrates on record keeping and submitting of financial statements.
Finance focuses on making decisions and carrying out analysis based on information presented by accounting.
Financial Accounting tends to be more concerned with the past.
Finance tend to be more interested in present and the future.
Financial Accounting tends to have an income focus.
Finance tends to have a cash flow focus.
Types of Financial Decision:
Investment Decisions
Financing Decisions
Asset Management Decisions
Investment Decisions:
Should we built this component or buy it?
What specific assets should be acquired?
Should we introduce a new product?
Which projects should be undertaken?
Financing Decisions:
What is the best structure of financing(debt versus equity)?
How much of our debt should be short-term as opposite to long-term?
What is the best dividend policy?
How will the funds be physically acquired?
Asset - Management Decisions:
How do we manage existing assets efficiently?
Financial Manager has varying degrees of operating responsibility over assets.
Greater emphasis on current asset management than fixed asset management.
The Goal of the Business:
The target of business is the maximize shareholder’s wealth.
It’s measured as the price of stocks.
Wealth maximization concept adjusts for deficiencies of previous concept.
Comparision of Two Concept:
Profit Maximization
Short-Term Oriented
Can not account for risk
Can lead mismanagement
Wealth Maximization
Long-term OrientedThe risk factor is taken account
Recognises the timing of returns
Section 2: An Overview of Business Environment
Types of Business
Sole Proprietorship:
A business that owned and operated by one individual person.
The owner and business are legally identical.
Pros:
Limited paperwork and start-up cost
Owner’s full control over the business
Less stringent reporting obligations
Cons:
Unlimited liability for debts
Difficulty in fund-raising
Business continuity concern
Partnership:
A business that owned and controlled by two or more persons who are equally liable for losses
Typically governed by partnership agreement.
Pros:
Risk is shared between the partners
Additional capital can be raised
No audit or public reporting requirements
Not subject to company tax
Cons:
Unlimited liability for debts
Administrative costs
Business continuity concern
Slow decision making process
Company:
Business that owned by shareholders.
Shareholder liability is limited to nominal value of shares that they own.
Business is legally separate from it’s owners.
Pros:
Less risky;
Fund-raising advantages
Separate legal entity from its shareholders
Tax benefits
Transferable form of ownership
Cons:
Publishing financial statements
Strict reporting obligations
Administrative issues
Double taxation
Legal restrictions on share issues(LLC)
Note:To view complete 4 sections of lecture, please download below the pdf or ppt file.
Thanks :)
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