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Revision 1 Financial Management, Financial Objectives and
Financial Environment
Topics List1. Financial Management Exam Qestion
Re!erence
a. Financial management decisions investment, financing and
dividend decisions
Jun10 Q4c
b. Three decisions relationship under MM vie! Jun 10 Q4c
". Financial Objectives
a. "rimar# ob$ective ma%imi&e shareholders' !ealth
b. Ma%imi&ing and satisficing
c. Financial indicators for ma%imi&ing shareholders'
!ealth
d. (on)financial indicators
e. *%ternal factors
#. $ta%e&olders
a. +ategories of staeholder group
b. -taeholders' areas of interest
'. Objectives in (ot)!or)pro!it Organi*ations
a. alue for mone#
b. *conom#, effectiveness and efficienc#
+. genc- problem
a. Meaning /ec 0 Q1e
b. o! to reduce the agenc# problem2 /ec 0 Q1e
. Macroeconomic Targetsa. *conomic gro!th and high
emplo#ment
b. 3o! inflation
c. alance of pa#ments stabilit#
d. T#pes of polic#
/. Financial 0nstittions
a. T#pes of financial institutions
b. Functions of financial intermediaries /ec 05 Q4a
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1. Financial Management
1.1 Financial management decisions cover investment decisions,
!inancing decisions
anddividend decisions
. The# are interlined.23ne "4145
6ecision Explanation
7nvestment decision 8hether to undertae ne! pro$ects
8hether to invest in ne! plant and machiner#
8hether to carr# out a taeover or a merger, etc.
Financing decision +ash available !ithin the compan#
9ccess to ne! sources of finance
+ost of finance :89++;
/ividend decision "a# less dividend if profits need to be
retained ne!
for investment
1.6 The three decisions relationship under Miller and Modigliani
:MM; investigationne problem for the financial manager is to
satisf# the ob$ectives of several
staeholders at the same time. Therefore, in practice a
distinction must be made
bet!een ma%imi&ing and satisficing.
Maximi*ing seeing the best possible otcome.
$atis!icing finding a merel- ade;ate otcome.
6.= Financial indicators pointing to!ards ma%imi&ing
shareholder !ealth include+*
"rofit after ta%
?evenue, etc.
6.4 (on)financial indicators include
