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Financial Management

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Course
Corporate Financial Management

Institution
University Of Cape Town (UCT)

Financial management involves the planning, organizing, directing, and controlling of financial activities to achieve an organization's financial goals. It encompasses activities such as budgeting, investing, and financial analysis to ensure optimal use of resources and maximize profitability.

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Uploaded on August 5, 2024
Number of pages 28
Written in 2024/2025
Type Other
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what is financial management

Institution
University of Cape Town (UCT)
Course
Corporate Financial Management

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FINANCIAL MANAGEMENT STUDY
NOTES

LEARNING OUTCOMES

1. Understanding Financial Principles and Concepts:
 Gain a thorough understanding of core financial principles, including
the time value of money, risk and return, and capital structure.

 Develop the ability to apply these principles in various financial
decision-making scenarios.

2. Financial Analysis and Planning:
 Learn to analyse financial statements to assess an organization’s
performance and financial health.

,  Understand the process of financial planning and forecasting, and
how to create budgets and financial projections.

3. Investment Decision-Making:
 Acquire the skills to evaluate different investment opportunities
using methods like Net Present Value (NPV), Internal Rate of Return
(IRR), and Payback Period.

 Understand portfolio management and the principles of
diversification to optimize investment returns.

4. Capital Structure and Financing Decisions:
 Learn how to determine the optimal capital structure for a company,
balancing debt and equity to minimize cost and maximize value.

 Understand different sources of financing, including equity, debt,
and hybrid instruments, and their implications for financial
management.

5. Working Capital Management:
 Develop strategies for managing a company’s working capital to
ensure liquidity and operational efficiency.

 Understand the management of accounts receivable, accounts
payable, inventory, and cash to optimize cash flow.

6. Risk Management:
 Understand the various financial risks, including market, credit, and
operational risks.

 Learn to apply risk management techniques, such as hedging and
insurance, to mitigate financial risk.

7. Corporate Finance Decision-Making:
 Gain insights into corporate finance decisions, including dividend
policy, mergers and acquisitions, and capital budgeting.

 Understand how financial decisions impact shareholder value and
corporate strategy.

8. Global Financial Management:
 Understand the challenges and opportunities in global financial
management, including currency exchange risk, international
financial markets, and cross-border investments.

, 9. Application of Financial Tools:
 Learn to use financial tools and software for analysis and decision-
making, including spreadsheets, financial modelling software, and
other relevant technologies.

WHAT IS FINANCIAL MANAGEMENT?
Financial Management is the practice of planning, organizing, directing,
and controlling the financial activities of an organization or individual. It
involves the efficient management of funds to achieve the financial goals
of the entity. The primary objective is to maximize the value of the entity
for its stakeholders, ensuring adequate returns on investments,
maintaining financial stability, and managing risks.

Understanding Financial Principles and Concepts
Financial principles and concepts are the foundational building
blocks of financial management. They guide decision-making
processes in finance, ensuring that individuals and organizations
make informed, strategic choices regarding their finances. Here’s a
breakdown of the core principles and concepts:

1. Time Value of Money (TVM):
 Concept: The time value of money is a fundamental financial
principle that states a dollar today is worth more than a dollar in the
future due to its potential earning capacity.
 Application: TVM is used in valuing cash flows, bonds, annuities, and
capital budgeting decisions. It's calculated using techniques like
Present Value (PV) and Future Value (FV).

2. Risk and Return:
 Concept: There is a direct relationship between risk and return; the
higher the risk, the higher the expected return. This concept helps
investors make decisions that align with their risk tolerance and
return expectations.
 Application: It is used in portfolio management, capital asset pricing
model (CAPM), and in evaluating the cost of capital.
3. Capital Structure:

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