Important Points for IC 89 - Management Accounting Exam
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Financial analysis mainly includes Ratio Analysis for Performance evaluation, financial health determination for various financial planning and decisions such as Investment, Financing and Divident decisions: Investment decisions determine how costly funds are allotted and committed to various projects and plans, Financing decisions relate to acquiring optimum fund to finance various fixed assets and working capital keeping in view the expected returns and required solvency, liquidity, profitability and growth, DIvidend decisions determine as to when and how much profits of the organisation can be distributed as dividend to shareholders.
Financial Decision is one of the major functions of financial management. Time value of money is one primary consideration of these financial decisions.
A rupee today is more valuable than a rupee after one year for the following reasons: Risk/Uncertainty, Present consumption, Inflation, Liquidity preference.
Financial management process and perspectives of an enterprise depend not only on corporate philosophy, financial risk-management policy and practice, but also on the financial system of the country and abroad. The financial manager therefore must have clear understanding of the financial system.
The financial management function in a firm is broadly divided into segments: Accounting and Control functions and Treasury Management functions.
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