What are the main objectives of financial management? Briefly explain.
The two main objectives of financial management are:
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Primary objective: The primary objective of financial management is maximization of shareholder’ wealth, which is achieved by increase in value of shares or the market price of the shares.
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Secondary objectives: In order to achieve the primary objective of wealth maximization, financial management should aim to the following objectives:
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Profit maximization/effective utilization of fund: Effective utilization of funds, by ensuring that benefits of an investment exceeds its cost.
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Availability of funds at reasonable costs: To raise funds at minimum cost and minimum risk, through effective financing decision.
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Ensure safety of funds: To ensure safety of funds by creating reserves, reinvesting profits etc.
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Maintaining adequate liquidity: To maintain financial liquidity and profitability through working capital decision.
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Avoiding idle finance: Idle finance not only adds to the cost of funds but also encourages wasteful expenditure. Therefore, financial management avoids over capitalization.
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Indian Railways has launched a new broad gauge solar power train which is going to be a path breaking leap towards making trains greener and more environment friendly. The solar power DEMU (Diesel Electric Multiple Unit) has 6 trailer coaches and is expected to save about 21,000 liters of diesel and ensure a cost saving of Rs 12, 00,000 per year. Name the objectives of management achieved by Indian Railways in the above case.
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The government of India announced Demonetization of ₹ 500 and ₹ 1,000 currency notes with effect from the midnight of November 8, 2016. As a result, the existing ₹ 500 and ₹ 1,000 currency notes ceased to be legal tender from that date. New currency notes of the denomination of ₹ 500 and ₹ 2,000 were issued by Reserve Bank of India after the announcement.
This step resulted in a substantial increase in the awareness about and use of Point of Sale machines, e-wallets, digital cash and other modes of cashless transactions. Also, increased transparency in monetary transactions and disclosure led to a rise in government revenue in the form of tax collection.
a. Enumerate the dimensions of the business environment highlighted above.
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A company, which manufactures a popular brand of toys, has been enjoying good market reputation. It has a functional organisational structure with separate departments for Production, Marketing, Finance, Human Resources and Research and Development. Lately to use its brand name and also to cash on to new business opportunities it is thinking to diversify into manufacture of new range of electronic toys for which a new market is emerging. Which organisation structure should be adopted in this situation? Give concrete reasons with regard to benefits the company will derive from the steps it should take.
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Ms. Jayshree recently completed her Post Graduate Diploma in Human Resource Management. A few months from now a large steel manufacturing company appointed her as its human resource manager. As of now, the company employs 800 persons and has an expansion plan in hand which may require another 200 persons for various types of additional requirements. Ms. Jayshree has been given complete charge of the company’s Human Resource Department.
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