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Summary of the principles of managerial finance (L.J. Gitman) R50,00
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  3. University Of Pretoria (UP)
  4.  
  5. FBS 210 (FBS210)

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Summary of the principles of managerial finance (L.J. Gitman)
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  • Chapter 1-3
  • April 5, 2021
  • 10
  • 2020/2021
  • Summary

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FINANCIAL MANAGEMENT
(FBS 210)
Based off Principles of managerial finance




Ref: Principles of managerial finance (L.J. Gitman)

, Chapter 1

Finance is the way in which money is managed. It is concerned with how many is
saved, invested, and spent on a personal and business level. Financial services refer to
the design and delivery of financial products and advice to people, businesses, and
governments.

Managerial Finance refers to the tasks of a financial manager working for a particular
business. A financial manager manages and oversees the financial affairs of a business.
They perform a variety of tasks relating to the financial matters of a business.



Legal forms of business organisation:

Sole proprietorships (Owned by one person who has full control over the
profit/loss and bears unlimited liability)
Partnerships (Two or more owners, partnership agreement drawn up and
profits/losses are shared)
Companies (An entity created by law, consists or shareholders who hold shares
{preference or ordinary} which forms their equity, there is limited liability.



The goal of the firm is to maximize shareholder wealth by increasing share price and
cater to the interests of other stakeholders ensuring shareholder value is maximized
due to increased profits and share price.

EPS is used to measure profits and is calculated by dividing total earning by number of
shares outstanding.

A firm must adhere to business ethics and possess good moral judgement.

A firm consists of a treasurer and controller too.



Relationship of the managerial function to economics and accounting

The economic principle of marginal cost-benefit analysis is the primary principle
used in managerial finance.

The principle states that “financial decisions should be made, and actions taken only
when the added benefits exceed added costs”.

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