FIN2603 Exam Pack
Contains:
• Comprehensive Notes & Summaries
• Exam Questions & Solutions
• Calculation Formulas
Knowledge to empower your oppotunities
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Introduction to managerial Finance
Financial Management for Non Financial Managers
It refers to the art and science of m...
Introduction to managerial Finance
Financial Management for Non Financial Managers
It refers to the art and science of managing money in an organisation.
Goal of Financial Management
The main or prime goal of financial management is to maximise the shareholders wealth ,
measured by Share price NOT Earnings per share(profit maximisation).
Agency Relationship
Refers to the association of the Shareholders (principal ) and the agencies(management), the
link of the two is based on the goal of financial management.
The agency is employed to make sure that during his tenure as the management , share
prices increased.
Agency Problem
This is the conflict between the agencies(management ) and the principal (shareholders), the
conflicts arises when the agencies pursues personal goals at the expense of the shareholders
(goal of financial management)
When managers sacrifices their main responsibilities of maximising shareholders, and
pursue other goals that enriches them, then the agency problem will arises as shareholders
tries to align the agencies to their main function
Agency costs
This refers to the expenditure incurred when the principal tries to mitigate the losses as a
result of the agency problem. This includes costs incurred on the following
Monitoring and compliance(audit) costs to make sure that the agency does
not abuse the opportunities and funds
Bonus shares and incentives paid to agencies as a motivational tool
Target incentives
Social Corporate Responsibility
This refers to the voluntary investing in non profit projects that benefits the society. Such
activities enhances the corporate image of the entity and this increase the shareholders
wealth in the long run
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,Corporate Governance
This refers to the way things are supposed to be done, it refers to the policies , norms,
standards and policies that are perceived by an entity and has to be strictly followed as the
defines the entity.
Functions of a Financial Manager
Acquisition of finance
Goal of Financial management
Investing decisions
Capital Budgeting
Accounting duties
Treasury of the entity
Overseer the accounting department
Financial Markets
Refers to a locus where buyers and sellers of funds, capital, financial instruments are traded
We have categories of Financial Markets called
o Secondary vs Primary Market
A primary market is a financial market where securities are initial traded, and a
Secondary market is a market where pre –owned securities are traded
o Money and Capital Market
A money market is a financial market where a short term financial securities are
traded whereas a Capital Market is a market where longterm financial securities are
traded eg , JSE, BESA , Bank ,
Business Units
Sole Trader
Partnerhsip Learners Activities, find out about the features, benefits and disadvantages
Private Limited
Public Limited
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, Examination Questions and Solutions
May/June 2012
Solution
Question 1 2
Question 2 3
Question 3 4
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