Conceptual Framework

y What is a Strategy? y The word Strategy comes from the Greek word

Strategos. Which refers to a military general and combines Stratos (the army) and ago (to read ). y So what could be a Strategy? A game plan, a policy, an action plan or a tactic? A strategy is- A flexible approach for achieving the deisred results, with sustainable success

Conceptual Framework
y What is Strategic Financial Management? y Strategic Financial Management is an approach

to management that relates financial techniques, tools and methodologies to strategic decision making to have a long-term futuristic perspective on financial well being of the firm to facilitate growth, sustenance and competitive edge consistently. y SFM relates to the strategies that a firm espouses to pursue its financial objectives and strengthen its financial position in the future.

Conceptual Framework
y Characteristics of SFM:y 1. SFM relates to long-term management of funds. y 2. It focuses on Profitability and wealth

maximization to facilitate better competitive position of the firm in the future and to invest funds to generate optimal returns over a period of time. y 3. It is result-oriented convergence of resources, especially of financial and economic resources .

Conceptual Framework
y Characteristics of SFM:y 4. It promotes growth, profitability and

sustainability of the organization in the long-run. y 5. It is an evolving and perpetual process that engages constant revamping of strategies to achieve strategic financial objectives, especially enhancing the value of the firm. y 6. It anticipates the repercussions of present decisions in the future.

Conceptual Framework
y Scope of Strategic Financial Management:y SFM has a wide scope and includes various

management discipline inputs to provide for profitability and sustenance to strengthen the financial status of the firm. 1. Strategic Investment management Decisions. 2. Strategic Financial management Decisions. 3. Strategic Liquidity management decisions. 4. Strategic Profitability management decisions. 5. Strategic Approach to shareholder s wealth management and value of firm decisions.

Conceptual Framework
y Importance of Stategic Financial Management:y 1. Proactive planning and forecasting funding y y y y y y y

needs. 2.Optimal utilization of resources. 3.Strategic investment Plans. 4.Liquidity maintenance. 5.Stakeholder interest. 6.Value of the firm. 7.Risk hedging , Encourages consistency in profitability. 8.Perspective beyond working capital requirements.

Conceptual Framework
y Cost Benefit Analysis:y A shrewd and alert strategist is recognized by his

ability to do Cost benefit Analysis quickly and correctly, for every decision he takes. y E.g. An organization deciding on the environmental and social costs of a special project which would yield fantastic profits to the organization and equally fantastic tax revenues to the government would have to work at a complex CBA.

Conceptual Framework
y Cost-benefit Analysis y Costs and Benefits in certain cases may not be

known. The quantification of unknown costs and benefits is impossible. It is like taking an infinite risk or shooting in the dark. y Finance executives tend to do only financial or accounting cost -benefit analysis, without applying the macro theories of comprehensive economics. This is extremely short-sighted.

Conceptual Framework
y Indicative Cost Benefit Analysis may be useful for

highly subjective decisions or judgements . Two or three decisions together may decide the overall impact of the process along with their relative cost and benefits. The indicative or relative significance of various variables deciding the ultimate outcome of the decision-making process can be used for approximate cost-benefit analysis.

Conceptual Framework

Conceptual Framework

Conceptual Framework

Conceptual Framework

Conceptual Framework

Conceptual Framework

Conceptual Framework

Conceptual Framework