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Contemporary Issues in Financial Management

PRESENTED BY: DR.PRIYANKA R. PHONDE.

financial management : It is the process of the typical firm. It looks at the financial manager, the field of finance, financial decisions and their implications, and the daily questions faced by the firms financial management.

Optimal Form of Organization Influenced by


Cost Complexity Liability Continuity Raising capital Decision making Tax considerations

Shareholder Wealth Maximization


Objective of financial management Shareholder Wealth Maximization (SWM)

Objective of the financial manager

NOT
Profit maximization, which does not consider the time value of money

Aims
This module builds on the materials covered in Principles of Financial Reporting and aims to provide with a full understanding of the current issues relating to financial reporting for international entities with complex organizational structures.

Learning Objectives
understand and critically assess the different approaches to income and asset value measurement, and to accounting for changing prices; understand and critically assess the regulatory framework for financial accounting; prepare and understand accounting for the following transactions; Share capital, distributable profits and reduction of capital Off balance sheet finance Financial instruments Employee benefits Taxation in company accounts Property, plant and equipment Leasing R&D; goodwill; intangible assets and brands Inventories Construction contracts foreign exchange transactions understand, apply, and critically assess the calculation of earnings per share understand and critically assess the increasing scope of financial reporting as reflected in environmental and social responsibility accounting. Introduce advanced theories and practices used in financial management. Introduce the professional finance literature. Develop abilities to analyze financial decisions and to communicate the results.

1. The User-Owner Principle: Those who own and finance the cooperative are those who use the cooperative. 2. The User-Control Principle: Those who control the cooperative are those who use the cooperative. 3. The User-Benefits Principle: The cooperative's sole purpose is to provide and distribute benefits to its users on the basis of their use.

Contemporary cooperative principles are:

WHAT ARE THE ISSUES ???


Changing demand, ecological issues, appropriate technology World wide recession Greater expectations of stakeholders Ethics and values Changing social, economic and political environment Expect the unexpected

ISSUES IN FINANCIAL SECTOR


How to ensure that there is no insider trading How to ensure that price rigging and other such practices are minimized. How to ensure that the interests of the investors are protected How to ensure that there is transparency, proper disclosure and proper reporting Does competition necessarily promote efficiency in financial markets? How should efficiency be characterized in financial markets? What failures of competition may have contributed to the crisis in the financial sector? What has been the role of competition in credit rating services, and of barriers to entry into providing those services? How are financial markets distinct from other types of markets? In what ways might competition policy treat financial institutions and products differently as a result of these differences?

Competition issues in the financial sector


(1) The financial sector is at the heart of every well-functioning market economy but it is also vulnerable to systemic loss of trust. 2) The current crisis resulted from failures in financial market regulation, not failure of the market itself or of competition. (3) Competition and stability can co-exist in the financial sector. In fact, more competitive market structures can promote stability by reducing the number of banks that are too big to fail. (4) Competition helps make the financial sector efficient and ensure that rescue and stimulus packages benefit final consumers. (5) Government interventions during the current crisis give rise to competition issues. Competition authorities should play a part in the design and implementation of exit strategies. (6) Exit strategy issues for competition include dealing with (a) mergers of large financial institutions, (b) barriers to entry in financial markets, (c) the sale of government stakes and (d) ending government support. 7) Competition law and policy are flexible enough to deal with the financial crisis. (8) A good relationship between competition authorities and financial regulators is essential. 9) Even during the crisis, competition authorities should continue to act independently, examining issues such as transparency and switching costs in retail banking. Easier switching and increased transparency could increase the competitiveness of current market structures and facilitate new entry and expansion 10) It is unclear whether competition authorities should sit at the table where decisions as to future government interventions are taken. (11) Within financial markets, credit rating agencies play an important role, but may have their own competition problems.

Competition issues in the real economy


1)The temporary crisis framework for the real economy. 2)The rationale for rescue packages in the real economy is more limited than for the financial sector. Great caution should be applied to requests for bailouts by firms that were already ailing. Propping up unproductive companies harms long-term growth. 3) National champions distort competition.

RECENT DEVELOPMENTS IN FINANCE SECTOR


grading of IPOs book building process mandatory underwriting dematerialization of shares demutualization of stock exchanges greater transparency and better risk management measures in stock exchanges investor education and protection The Securities and Exchange Board of India, set up in 1988 & SEBI Act 92 Capital Issues (Control) Act, 1947repealed & CCI abolished National Stock Exchange of India (NSE)with computerized on line screen based nation- wide electronic trading

REFORMS IN FINANCIALSECTORS
Clearing and settlement cycle =T+2 Qualified institutional buyers (QIBs) have prohibited from withdrawing their bids after the closure of bidding. SEBI introduced additional criteria of net tangible assets, minimum number of allottees in public issue and profitability. Mutual Funds permitted to make investments in foreign debt securities including government securities Mutual Funds required to disclose the portfolios on their web sites in the prescribed format before the expiry of one month from close of each half-year unique client code Withdrawal of restriction on short sales underwriting made mandatory

CONCLUSIONS
The issues are due to changes in economic, social and political environment World Economic system is undergoing massive changes Managers have undertake SWOT analysis and evolve strategies to suit the situation The age of discontinuity has started

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