Meaning: Planning, organising, directing & controlling all financial activities (estimating needs, arranging funds, using wisely, checking usage).
Importance: Setting clear goals, efficient resource use, deciding fund sources, dividend decisions, cost management, long-term stability.
Functions: Forecasting requirements, selecting fund sources, investment decisions, cash management, department coordination, financial controls, surplus disposal, capital structure decisions.
SCOPE OF FM – 3 KEY DECISIONS
1. Investment Decision: Where to invest funds? Long-term (land, building, machinery) & Short-term (raw materials, salaries).
2. Financing Decision: Mix of funds? Owned funds (shares, retained earnings) vs Borrowed funds (loans, debentures).
3. Dividend Decision: How much profit to distribute (dividend) vs retain for growth?
FIXED CAPITAL vs WORKING CAPITAL
Fixed Capital: Long-term investment (factory, machinery), used for years, not easily converted to cash.
Working Capital: Short-term needs (raw materials, salaries), used within one year, easily converted to cash.
2. PRODUCTION MANAGEMENT
Production Planning: Deciding what, when, how much to produce; like planning a school event (activities, people, schedule, materials).
Production Control (5 Steps with Examples):
- Routing: Planning the sequence of operations. (Shirt making: Cutting → Stitching → Ironing → Packing).
- Loading: Assigning work to workers/machines. (5 tailors for stitching, 2 for cutting).
- Scheduling: Setting time for each operation. (Cutting: 9-11 AM, Stitching: 11 AM-3 PM).
- Dispatching: Starting production as per plan. (Giving cut cloth to tailors with instructions).
- Follow-up: Checking progress and fixing problems. (Checking if shirts ready by 4 PM).
3. HUMAN RESOURCE MANAGEMENT (HRM)
Meaning: Like a sports team captain – choosing right players, training, motivating for team success.
MANAGERIAL FUNCTIONS
- Planning: Forecasting manpower needs. (School estimating 10 new teachers next year).
- Organising: Designing structure & assigning duties. (Principal → Headmaster → Subject Heads).
- Directing: Guiding & motivating employees. (Principal: "Best teacher gets award").
- Controlling: Monitoring performance & corrective action. (Checking syllabus completion).
- Procurement: Getting employees (Advertisement → Tests → Interview → Selection).
- Training & Development: Improving skills (computer training) & overall growth (leadership programs).
- Compensation: Fair pay – Monetary (salary, bonus) & Non-monetary (recognition, awards).
- Maintenance: Good working conditions (medical, sports, housing facilities).
- Industrial Relations: Maintaining good employer-employee relations (solving disputes).
4. MARKETING MANAGEMENT
Principle: "Consumer is the king of the market" – businesses succeed by satisfying customers.
MARKET CONCEPTS
- Place Concept: Physical location for buying/selling (Supermarket, Mall).
- Area Concept: Any place where exchange happens (Online shopping – Amazon).
- Demand Concept: Total demand for a product (Umbrellas in rainy season).
- Exchange Concept (Oldest): Focus on just selling. (Street vendor shouting "Buy my fruits!")
- Production Concept: Focus on mass production, low cost. (Henry Ford: "Any color as long as it's black").
- Product Concept: Focus on best quality product. (Nokia phones known for durability).
- Selling Concept: Focus on aggressive selling. (Insurance agents convincing).
- Marketing Concept (Modern): Focus on customer needs & satisfaction. (McDonald's offering veg burgers in India).
Customer satisfaction, Business profit, Building customer base, Right marketing mix (4Ps), Improving quality of life, Generating employment, Increasing national income, Ensuring economic stability.
SELLING vs MARKETING CONCEPT
Selling Concept: Starts at factory, focuses on product, uses aggressive selling to achieve profit through sales volume.
Marketing Concept: Starts at market, focuses on customer needs, uses integrated marketing to achieve profit through customer satisfaction.