Tuesday, October 3, 2006

Basic Financial Management

Isn't it important to understand corporate financial information, understand how accounting data flows and evaluate corporate financial performance and understand the language of accounting and finance.

And though it is not exactly rocket science, it looks entirely geeky to many of us. Well, I'll use the KISS strategy; Keep It Simple, Stupid...nothing that u r beginning to imagine...

Before we move on to Financial ratios, capital budgeting,et al, let's begin with three broad areas of Financial Management. They are:

1. Capital Budgeting : Defines the business and capital allocation.
2. Capital structure : Discusses the ways and means of financing.
3. Working Capital Management : It's short term(day to day) Financial Management.

The fundamental principle of Finance is that any business proposal shd be undertaken only when the present value of the future cashflows is greater than the initial cash outlay.

And I'll sign off with the "Goal" of Financial Management which is the maximisation of the wealth of the shareholders.

Haven't I kept it simple,stupid...

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