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Financial Management Essentials You Always Wanted To Know

Financial Management Essentials You Always Wanted To Know

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Financial Management Essentials You Always Wanted To Know

Comprimento:
144 página
1 hora
Lançado em:
Jul 1, 2017
ISBN:
9781946383655
Formato:
Livro

Descrição

•Financial Management concepts simplified
•Fundamentals explained for business professionals and non-finance graduates
•Important standard principles covered
•Solved exercises and practice questions

Financial Management Essentials You Always Wanted To Know covers Financial Management concepts in concise and easy-to-understand manner for business professionals and non-finance graduates. This book includes Financial Management FUNDAMENTALS, SOLVED Examples, Important CONCEPTS & PRINCIPLES and Ample PRACTICE Exercises.
The topics covered are:
a) Financial Statement Analysis
b) Cost of Capital & Capital Budgeting
c) Working Capital Management
d) Capital Structure
e) Distribution to Shareholders
f) Forecasting Financial Statements

This Self Learning Management Series intends to give a jump start to working professionals, whose job roles demand to have the knowledge imparted in a B-school but haven’t got a chance to visit one. This series is designed to address every aspect of business from HR to Finance to Marketing to Operations, be it any industry. Each book includes basic fundamentals, important concepts, standard and well-known principles as well as practical ways of application of the subject matter. The distinctiveness of the series lies in that all the relevant information is bundled in a compact form that is very easy to interpret.

Lançado em:
Jul 1, 2017
ISBN:
9781946383655
Formato:
Livro

Sobre o autor

Vibrant Publishers, USA is a leading publishing house publishing high quality books for IT professionals, management professionals as well as graduate students. We have redefined the way in which highly rich content can be made available to today's fast paced generation. This new generation's NEED TO KNOW NOW attitude and the highly competitive business environment has triggered us to publish books that have 'just the essential' information. We, at Vibrant Publishers, are committed to publishing books that are not only content-rich but also concise and approachable enabling more people to read and make the fullest use of them.We have introduced three different series of books for the three different and much in-demand genre of people.a) The Job Interview Questions Series caters to IT professionals specifically college freshman, junior/senior programmers, business analysts, and project managers.b) The Self Learning Management Series is intended to give a jump start to working professionals, whose job roles demand to have the knowledge imparted in a B-school but haven't got a chance to visit one.c) The Test Prep Series covers GRE, GMAT, SAT, TOEFL and IELTS exam books.About Job Interview Questions SeriesAs technology now-a-days changes very often, IT Professionals need to be updated with the latest trends in these technologies constantly and more importantly instantly. Job Interview Questions Series is THE answer to this need.We believe in delivering quality content and do so by tying up with the best authors around the globe. This series of books is written by expert authors and programmers who have been conducting interviews since a decade or more and have gathered vast experiences in the world of information technology. Unlike comprehensive, textbook-sized reference guides, our books include only the required information for job search. Hence, these books are short, concise and ready-to-use by the working Professionals.All the books in Job Interview Questions series include about 250 to 400 technical & HR interview questions with answers. They also include proven strategies along with Dozens of examples to respond to interview questions and thus help nail the interviews. Besides these, each book is accompanied by Aptitude Tests available as a download from our website.We hope to serve our readers by saving them time - by providing them with information that is important, and not bombarding them with data from which they need to pick relevant information.About Self Learning Management SeriesThe Self Learning Management series intends to give a jump start to working professionals, whose job roles demand to have the knowledge imparted in a B-school but who haven't got a chance to visit one. This series is designed to illuminate aspects of management, finance, organization development, consumer behavior, human resources, marketing and business. Dozens of books available in the market give ample information about these topics that may or may not be required. The distinctiveness of this series lies in that it gives only the relevant required information bundled in a compact form, uncomplicated to interpret.This series would cover various management topics in 10 different titles. Each book includes basic fundamentals, important concepts, standard and well-known principles as well as practical ways of application of the subject matter. The series will be instrumental in assisting all those who are in the following job roles:a) Dealing with Human Resourcesb) Taking financial decisionsc) Responsible for Sales and Marketingd) Carrying out the Operational activities in a companye) Directing Business strategiesf) Engaged in managerial decision making

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Financial Management Essentials You Always Wanted To Know - Vibrant Publishers

Financial Management Essentials You Always Wanted To Know

Financial Management concepts simplified

Fundamentals explained for business professionals and non-finance graduates

Important standard principles covered

Solved exercises and practice questions

Self-Learning Management Series

www.vibrantpublishers.com

*****

Financial Management Essentials You Always Wanted To Know

Published by Vibrant Publishers at Smashwords

Copyright 2017 Vibrant Publishers, USA.

Smashwords Edition, License Notes

Copyright 2017, By Vibrant Publishers, USA. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior permission of the publisher.

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. The author has made every effort in the preparation of this book to ensure the accuracy of the information. However, information in this book is sold without warranty either expressed or implied. The Author or the Publisher will not be liable for any damages caused or alleged to be caused either directly or indirectly by this book.

The publisher wishes to thank Kalpesh Ashar (India) for his valuable inputs to this edition.

Vibrant Publishers books are available at special quantity discount for sales promotions, or for use in corporate training programs. For more information please write to bulkorders@vibrantpublishers.com

Please email feedback/corrections (technical, grammatical or spelling) to spellerrors@vibrantpublishers.com

To access the complete catalogue of Vibrant Publishers, visit www.vibrantpublishers.com

*****

Table of Contents

1. Introduction to Financial Management

2. Financial Statement Analysis

Ratio Analysis

DuPont Framework

Benchmarking

Limitation of Financial Ratios

Common-size Financial Statements

Solved Examples

Practice Exercise

3. Cost of Capital

Cost of Debt (kd)

Cost of Preferred Stock (kp)

Cost of Retained Earnings (ks)

Cost of New Common Stock (ke)

Weighted Average Cost of Capital (WACC)

Solved Examples

Practice Exercise

4. Capital Budgeting

Free Cash Flow

Timing of Cash Flows

Estimating Cash Flows over Life of Project

Payback Period

Discounted Payback Period

Net Present Value (NPV)

Internal Rate of Return (IRR)

Modified Internal Rate of Return (MIRR)

Usage of Capital Budgeting Methods

Solved Examples

Practice Exercise

5. Working Capital Management

Cash Conversion Cycle

Current Asset Investment Policies

Current Asset Financing Approaches

Short Term Financing Options

Solved Examples

Practice Exercise

6. Capital Structure

Debt

Optimal Capital Structure

Capital Structure Theories

Solved Examples

Practice Exercise

7. Distribution to Shareholders

Factors in setting Dividend Distribution Policy

Residual Dividend Model

Dividend Payment Procedures

Dividend Reinvestment Plan (DRIP)

Stock Splits and Stock Dividends

Stock Repurchases

Solved Examples

Practice Exercise

8. Forecasting Financial Statements

Step 1 - Forecast Sales

Step 2 - Forecast Income Statement

Step 3 - Forecast Balance Sheet - 1st Pass

Step 4 - Raising Additional Funds Needed (AFN)

Step 5 - Forecast Balance Sheet - 2nd Pass

AFN Formula

Solved Examples

Practice Exercise

Glossary

*****

Introduction to Financial Management

Financial Management is a field of finance that deals with the use of financial information of a company to take decisions. The diagram below shows the steps in the analysis of financial information.

Financial Accounting is a field that deals with the preparation of financial statements (refer the book Financial Accounting Essentials You Always Wanted to Know of this series).

Financial Management uses this information to first analyze the company’s health and then to take appropriate decisions.

Consider, for example, the Balance Sheet and Income Statement of two companies as below:

From the above financial statements, it is evident that both the companies have the same Net Income ($12 million).Following questions arise:

a) As a banker, is this information enough to extend a loan to both the companies?

b) As an investor, does this mean goods returns?

c) As a manager, are these returns the best in the industry?

Just by looking at the individual numbers in the financial statements it is not possible to answer the above questions. In order to answer them one needs to do financial statement analysis that looks at a combination of numbers that provides more information. This analysis compares a combination of financial numbers (ratios) over a period of time for a company and also compares these with other companies in the same industry. This analysis is done using two tools given below:

a) Ratio analysis

b) Common-size financial statements

Using the data from the financial statement analysis companies make appropriate decisions to ensure that they meet their ultimate business objective – maximization of their stock price. The decisions are taken in the following areas:

a) Cost of Capital

b) Capital Budgeting

c) Working Capital Management

d) Capital Structure & Leverage

e) Dividend Policy

Finally, companies use Pro forma financial statement to do a what-if analysis and estimate their financial statements for the next period (quarter/year). Companies also use financial control systems to maintain control on their financial decisions.

The later chapters describe each of the above areas in detail, starting with the financial statement analysis, followed by financial decision making, and finally forecasting financial statements.

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Financial Statement Analysis

Analysis of Financial Statements is done using financial ratios and common-size financial statements. In this chapter we shall discuss both techniques in detail.

Ratio Analysis

The financial statements of a company report the company’s position at a given point in time (Balance Sheet) and its operations over a period of time (Income Statement and Statement of Cash Flows). This data can be used by the company’s management, bankers and investors to predict future and to plan actions to improve it. But this analysis is more useful when done using financial ratios instead of individual numbers from the financial statements. For example, consider a company paying $100,000 interest on its debt of $1,000,000, and another company paying $50,000 interest on its debt of $700,000. If one needs to know which company is financially stronger then it is done by comparing the company’s interest expense with respect to its debt, studying the company’s debt with respect to its total assets, comparing the interest paid against the income of the company and comparing its debt structure with that of other firms in the same industry.

In order to do the above analysis, ratios are to be formed using data from the balance sheet, income statement and the statement of cash flows of the company. There are several ratios that exist and each has a different purpose. Some ratios involve only balance sheet items or income statement items or items from the statement of cash flows. Others involve a combination of items from these

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