FM Essay Example | Topics and Well Written Essays - 4000 words

FM - Essay Example Practicing managers are interested in this subject because among the most crucial decisions of the firm are those which relate to finance, and an understanding of the theory of financial management provides them with conceptual and analytical insights to make those decisions skillfully1. Financial management, as an academic discipline, is concerned with decision-making in regard to the size and composition of assets and the level and structure of financing. To make wise decisions a clear understanding of the objectives, which are sought to be achieved, is necessary. The objective provides a framework for optimum financial, decision-making. In other words, they are concerned with designed a method of operating the internal investment and financing of a firm. These all are done in a systematic way if financial management is studied 2. Financial management is related to profit maximization as a decision criterion. According to profit maximization goal, actions that increase profits should be undertaken and those that decrease profits are to be avoided. In specific operational terms, as applicable financial management, the profit maximization criterion implies that the investment, financing and other decisions of the problem should be oriented to the maximization of profits. Though in our specific proble... In specific operational terms, as applicable financial management, the profit maximization criterion implies that the investment, financing and other decisions of the problem should be oriented to the maximization of profits. Though in our specific problem, financial goal is set up in such a way that of not operating at a loss, financial management is needed at all as the main objective of financial management is profit maximization. Workings for setting up financial goal: Fixed cost: Refurbishment cost 3: 8000 Building fixed overheads: 2000 per month 2000 6 months=12000 for 6 months So total fixed cost= 8000+12000 =20000 Fluctuation of Personnel Contingent 4 100 150 200 250 300 Cost of Goods sold 5 108000 162000 216000 270000 324000 Advanced stock Purchased for 2 weeks 3600 5400 7200 9000 10800 Total variable Cost 6 111600 167400 223200 279000 334800 Total revenue: Spend of customers/ Revenue of the store 7 150000 225000 300000 375000 450000 Total cash inflow Considering Fluctuations: 3000 8 153000 228000 303000 378000 453000 Total cash inflow Considering Fluctuations: 4000: 154000 229000 304000 379000 454000 Net cash inflow (Considering starting Cash as 3000) 9 21400 40600 59800 79000 98200 Remark 10 So to operate the store at not operating loss the minimum financial goal have to be 153000 for six months. Requirement 2: Tools to analyze a project: Ratios provide very useful tools for the manager to assess the organization by making two basic types of comparisons. First, the analyst can compare a present ratio with past (or expected) ratios for the organization to determine if there has been an improvement or