INTRODUCTION TO FINANCIAL MANAGEMENT

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INTRODUCTION TO FINANCIAL MANAGEMENT by Mind Map: INTRODUCTION TO FINANCIAL MANAGEMENT

1. WHAT IS FINANCE

1.1. FINANCE IS THE ART AND SCIENCE OF MANAGEMENT OF MONEY AND OTHER ASSETS

1.1.1. Obtain and allocate financial resources effectively and efficiently

1.1.2. Maintenance and creation of economic value and wealth

1.1.3. Dealing with financial decision - New Product - Issue Stock - New Asset - Debt - Borrowing

1.2. IT IS THE PROCESS OF WHICH MONEY IS TRANSFERRED AMONG BUSINESS, INDIVIDUALS AND GOVERNMENT VIA THE FINANCING AND INVESTMENT ACTIVITIES OF SAID PARTIES

2. WHAT IS FINANCIAL MARKET

2.1. INSTITUTIONS AND PROCEDURES THAT FACILITATE TRANSACTIONS IN ALL TYPE OF SECURITIES

2.1.1. CAPITAL MARKET

2.1.1.1. Long term securities issued by firms and government are exchanged

2.1.1.2. Equity and debt instruments traded

2.1.1.3. Carries greater risks but higher return

2.1.2. MONEY MARKET

2.1.2.1. Short term debt instrutments

2.1.2.2. Issued by firms and government

2.1.2.3. Low risk and liquid

2.2. TO ALLOCATE FINANCIAL RESOURCES WITHIN THE ECONOMY

2.3. PROVIDE SOURCES OF FUNDS TO DEFICIT UNITS

2.4. FIRMS RECEIVE MONEY FROM IT, WHILE INVESTORS MADE INVESTMENT

3. SUPPLIER AND DEMAND OF FUNDS

3.1. Surplus and deficit units

3.2. Households, government and firms

3.3. Provider of funds

3.4. Receiver of funds

4. FINANCIAL MANAGER FUNCTIONS

4.1. CONTROLLING

4.1.1. Reinforce current performance that confirms the original plans

4.1.2. Analysis of causes and responsibilities

4.1.3. Modify and develop new strategies for future use

4.2. PLANNING

4.2.1. Forecast the outcome of the strategies implanted

4.2.2. Decided on what, how when the firm is aiming to do

4.2.3. Development, refinement, and evaluation of the firm goals and strategies

5. GOAL OF THE FIRM

5.1. Maximization of profit

5.2. Maximization of sales

5.3. Maximization of share price

5.4. Maximization of risk

6. BUSINESS ORGANIZATION

6.1. A BUSINESS ENTITY THAT USES ECONOMIC RESOURCES OR INPUTS TO PROVIDE GOODS OR SERVICES TO CUSTOMERS IN EXCHANGE FOR MONEY OR OTHER GOODS AND SERVICES

6.1.1. Sole proprietorship

6.1.2. Partnership

6.1.3. Corporation

6.1.4. Limited liability company

6.1.5. Cooperative

7. RISK AND RETURN RELATIONSHIP

7.1. RISK

7.1.1. Inventory return are not known with certainity

7.2. RETURN

7.2.1. Benefit or outcome as result from investment

7.3. RISK-RETURN TURNOFF

7.3.1. Relationship of which high risk high return, vice versa

7.4. TYPE OF RISK

7.4.1. Systematic Risk

7.4.1.1. Risk unavoidable and cannot be eliminated

7.4.2. Unsystematic Risk

7.4.2.1. Risk can be eliminated such as operation or profits

7.5. CORRELATION

7.5.1. Positive Correlation

7.5.1.1. Securities involve direct relationship, tend to increase risk in another

7.5.2. Negative Correlation

7.5.2.1. Securities involve has inverse relationship, tend to reduce risk in another

7.5.3. Zero Correlation

7.5.3.1. Have no relationship with another