INTRODUCTION TO FINANCIAL MANAGEMENT:
Financial management is largely concerned with financing, dividend & investment decisions of the firm with some overall goal in mind corporate finance theory have developed around goal in mind.
Financing decisions deal with the firm’s optimal capital structure
In terms of debt &equity. Dividend decisions relate to the form in which returns generated by the firm are passed on to equity holders.
Financial management defined as:
The management of the finances of a business /organization in order to archive financial objectives.
Taking a commercial business as the most common organizational structure, the key objectives of financial management would be to:
· Generate cash
· Provide an adequate return on investment bearing in mind the risks that the business taking & the resources invested.
There are three key elements to the process of firm:
- Financial planning
- Financial control
- Financial decision making
NATURE OF FINANCIAL MANAGEMENT:
Financial management is that Managerial activity which is concerned with the planning and controlling of firm’s financial resource. Financial management provides conceptual and analytical solutions to the problems, which play a crucial role in the financial activities of the firm.
A successful business manager uses a goal oriented finance structure. Goals of Financial manager are
· Wealth maximization of shareholders
· Liquidity and profitability of the firm.
CAPITAL BUDGETING is a long term investment made by the organization in different projects and it helps the firm in evaluating the projects under taken by different techniques.
According to Weston and Brigham “CAPITAL BUDGETING” involves the entire process of planning expenditures whose returns are expected to extend beyond one year.
The CAPITAL BUDGETING decisions include Replacement, Expansion, and
Diversification, Research and Development and miscellaneous proposals.
Capital budgeting may be define as the decision making process by which a firm evaluates the purchase of major fixed assets, including buildings, machinery and equipment.
An efficient allocation of capital is the most important finance function
in modern times. It involves decisions to commit firm’s funds to long-term
Such decisions are tend to determine the value of company/firm by Influencing its growth, profitability & risk.
Investment decisions are generally known as capital budgeting or capital
expenditure decisions. It is clever decisions to invest current in long term assets
expecting long-term benefits firm’s investment decisions would generally include expansion, acquisition, modernization and replacement of long-term assets.
Such decisions can be investment decisions, financing decisions or operating decisions. Investment decisions deal with investment of organization’s resources in Long tern (fixed) Assets and / or Short term (Current) Assets. Decisions pertaining to investment in Short term Assets fall under “Working Capital Management”. Decisions pertaining to investment in Long term Assets are classified as “Capital Budgeting” decisions.
Capital budgeting decisions are related to allocation of investible funds to different long-term assets. They have long-term implications and affect the future growth and profitability of the firm.
NEED FOR THE STUDY
· The Project study is undertaken to analyze and understand the Capital Budgeting process in cement manufacturing sector, which gives mean exposure to practical implication of theory knowledge.
· To know about the company’s operation of using various Capital Budgeting techniques.
· To know how the company gets funds from various resources.
· To planning for future needs of the firm.
· To co-ordinate of the firm.
· To maximization of organizational effectiveness.
OBJECTIVES OF THE STUDY
· To study the relevance of capital budgeting in evaluating the project for project finance
· To study the technique of capital budgeting for decision- making.
· To measure the present value of rupee invested.
· To understand an item wise study of the company financial performance of the company.
· To make suggestion if any for improving the financial position if the company.
· To understand the practical usage of capital budgeting techniques
· To understand the nature of risk and uncertainty
To achieve aforesaid objective the following methodology has been adopted. The information for this report has been collected through the primary and secondary data. . The purpose of a methodology is to allow for controlling the entire project management process while ensuring the success of current technologies and business goals. Typically a methodology in project management describes every step in depth, so that a project manager will know what he or she will need to do in order to deliver and implement the project under budget, on time and with saved effort.
· Primary data
· Secondary data
Ø Primary Data
It is also called as first handed information; the data is collected through the observation in the organization and interview with officials.
By asking question with the accounts and other persons in the financial department.
A part from these some information is collected through the seminars, which were held by KESORAM
Ø Secondary Data
The secondary data have been collected through the various books, magazines,
broachers & websites.
Other books and Journals and magazines.
LIMITATION OF THE STUDY
v Lack of time is another limiting factor, i.e., the schedule period of 8 weeks are not sufficient to make the study independently regarding Capital Budgeting in KESORAM.
v The busy schedule of the officials in the KESORAM is another limiting factor. Due to the busy schedule officials restricted me to collect the complete information about organization.
v Non-availability of confidential financial data.
v The study is conducted in a short period, which was not detailed in all aspects.
v All the techniques of capital budgeting are not used in KESORAM. Therefore it was possible to explain only few methods of capital budgeting.