Set of activities dealing with the management of funds

• Set of activities dealing with the management of funds

• Decision of collection and use of funds

• Branch of economics that studies the management of money and other assets

• Determines if funds in an organisation are being used properly

• Financial analysis used by companies and businesses to make decisions and corrective actions towards the sources of income and the expenses and investments that need to be made in order to stay competitive.

• Financial managers make investment decisions

o Weighing the cost and benefits of each investment or project

o Decide which of them qualify as good use of shareholders money

o Decides how to pay for them, how to raise the money – via way of selling shares (equity) or to borrow the money (debt).

o Must ensure firm has enough cash on hand to meet its day to day tasks.

o All decisions are to maximise the wealth of the owners, the shareholders

o FM = caretaker of shareholder’s money

Legal forms of business organisation

• Three common forms of business structures

o Sole Proprietorship

 Known as sole trader

 Business owned by one person

 95% of businesses in AUS are sole traders

 Inexpensive to establish and maintain, with least reporting to the tax office

o Partnership

 Group of people to contribute their time, talents and money towards the business.

 Share responsibilities and profits

 If no formal partnership agreement exists the law assumes equal share

 Ability to raise finance foe the business in enhanced

 All partners’ liable if the business incurs debts.

 Articles of partnership = contract for partnership agreement

 Where the contract is silent the Partnership Act prevails

o Corporation

 Artificial being created by law (legal entity)

 Has powers of an individual,

 Can be sued, make and be party to contracts, and acquire property in its own name

 Dominant form of business organisation

 Owners of a corporation are its shareholders whose ownership and equity, is evidence either ordinary shares or preference shares

 Shareholders expect to earn a return by receiving dividends – periodic distribution of earnings

Corporate Governance

• Refers to the way organisations

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