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Strategic Financial Management. Course Introduction: Game Plan An over view of the Financial Management Khuram Raza CMA, MS Finance Scholar. Course Introduction: Game Plan. What is Financial Management?.
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Strategic Financial Management Course Introduction: Game Plan An over view of the Financial Management Khuram Raza CMA, MS Finance Scholar
What is Financial Management? Concerns the acquisition, financing, and management of assets with some overall goal in mind • Investment Decision • Financing Decision • Asset Management Goals of Successful Companies 1. All successful companies identify, create, and deliver products or services that are highly valued by customers—so highly valued that customers choose to purchase from them rather than from their competitors. 2. All successful companies sell their products/services at prices that are high enough to cover costs and to compensate owners and creditors for the use of their money and their exposure to risk. Attributes of Successful Companies Skilled people Strong relationships Enough funding
Value creation occurs when we maximize the share price for current shareholders. Maximization of Shareholder Wealth! How?? Profit Maximization vs Earning per Share What we Needed current and future profits and EPS; the timing, duration, and risk of profits and EPS; dividend policy; and all other relevant factors.
Profit Organization Maximization of share holder wealth How? Increase in share prices and Dividend payment Not for Profit Organization Welfare of the society How? Efficiency, Economy and Effectiveness Strategic Financial Management • Non-Financial Objectives • Customer satisfaction • Marinating competitive position and market share • Leadership in R&D • Responsibilities to Suppliers and society Financial Objectives • Growth in earning per share • Growth in dividend • Gearing Target Setting Objective • Who are the main stakeholder • Which are the most important objective • How the achievement of objective be measured Identification of the possible strategies capable of maximizing an organizations net present vale, the allocation of scarce capital resource among the competing opportunities and the implementation and monitoring of the chosen strategies so as to achieve stated objectives
Corporate social Responsibility Managing stakeholder Relationships Agency Problem Corporate Governance: • refers to the system by which corporations are managed and controlled. It encompasses the relationships among a company’s shareholders, board of directors, andsenior management. These relationships provide the framework within which corporate Goal Congruence Increase in Share price+ Dividend Incentives+ perquisites Connected Stakeholder • Customer • Supplier • Banker Management Shareholder External Stakeholder • Government • Local communities • Pressures groups
Quiz • Explain why accounting profits may not be the best measure of a company’s achievements. • Discuss how good corporate governance procedures can help to manage underperformance in private sector companies. • Discuss the factors that should be considered when deciding on a management remuneration package that will encourage the directors to maximize the wealth of shareholders, giving examples of management remuneration packages that might be appropriate.
