financial management

Financial management is the management of asset purchase (investment), financing (financing), operating cash flow (working capital) and profit distribution under a certain overall goal. Financial management is an integral part of enterprise management. It is an economic management work to organize enterprise financial activities and handle financial relations according to financial laws and regulations and financial management principles. To put it simply, financial management is an economic management work to organize enterprise financial activities and deal with financial relations.

catalogue

Basic information

Evolution of financial management

The goal of financial management

Content of financial management

Basic theory of financial management

Capital asset pricing model

Ten basic principles of financial management

Innovation of financial management in modern enterprises

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Basic information

At present, financial management software is the only comprehensive financial analysis product in China, which integrates financial data collection and reporting management, financial statement analysis, financial ratio analysis, account set data analysis, comprehensive financial performance evaluation, report, report making management and data reporting. It is BizSmart FA financial analysis software developed by Wanda, a well-known domestic business intelligence manufacturer. Compared with other similar products, it has the characteristics of powerful function, simple deployment and low cost of ownership, and has been successfully applied in hundreds of large and medium-sized enterprises. The characteristics of financial management The complexity of enterprise production and operation activities determines that enterprise management must include many aspects, such as production management, technical management, labor and personnel management, equipment management, sales management, financial management and so on. All work is interrelated and closely coordinated, and at the same time there is a scientific division of labor, each with its own characteristics. The characteristics of financial management are as follows.

(A) financial management is a comprehensive management work.

In the process of division of labor and decentralization, enterprise management has formed a series of specialized management, some focusing on the management of use value, some focusing on the management of value, some focusing on the management of labor factors, and some focusing on the management of information. With the development of social economy, financial management is required to mainly use the form of value to manage business activities. Through the form of value, all the material conditions, operating process and operating results of the enterprise are reasonably planned and controlled, so as to achieve the purpose of continuously improving efficiency and increasing enterprise wealth. Therefore, financial management is both an independent aspect of enterprise management and a comprehensive management work.

(B) financial management and all aspects of enterprises have extensive links.

In an enterprise, all revenue and expenditure activities involving funds are related to financial management. In fact, it is rare that all departments within an enterprise are not exposed to funds. Therefore, the tentacles of financial management often extend to every corner of enterprise management. Each department will contact the financial department through the use of funds. In terms of rational use of funds and saving capital expenditure, all departments should also accept the guidance of the financial department and be bound by the financial system to ensure the improvement of the economic benefits of enterprises.

(C) financial management can quickly reflect the production and operation of enterprises.

In enterprise management, whether the decision is proper, whether the operation is reasonable, whether the technology is advanced and whether the production and sales are smooth can be quickly reflected in the financial indicators of the enterprise. For example, if the products produced by enterprises are marketable and reliable in quality, they can promote the development of production, realize the prosperity of production and marketing, accelerate the capital turnover and enhance profitability, which can be quickly reflected through various financial indicators. This also shows that financial management is independent and restricted by the management of the whole enterprise. The financial department should, through its own work, inform the business leaders of the changes in financial indicators in a timely manner, so that the work of various departments can be brought into the track of improving economic efficiency and strive to achieve the goal of financial management.

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Evolution of financial management

The embryonic period of financial management

Enterprise financial management originated at the end of 15 and the beginning of 16. At that time, the western society was in the embryonic period of capitalism, and many commercial cities along the Mediterranean coast appeared commercial organizations with public shares. Shareholders of stocks are businessmen, princes, ministers and citizens. The development of commodity joint-stock economy objectively requires enterprises to reasonably predict capital demand and effectively raise funds. But at this time, the demand for funds by enterprises is not great, and the financing channels and methods are relatively simple. The financing activities of enterprises are only attached to enterprise management, and there is no independent financial management major. This situation lasted until the end of 19 and the beginning of the 20th century.

Financing period

1At the end of the 9th century and the beginning of the 20th century, the success of the industrial revolution promoted the continuous expansion of enterprise scale, the remarkable improvement of production technology and the further development of industrial and commercial activities. The joint-stock company developed rapidly and gradually became the dominant enterprise organization form. The development of joint-stock companies not only caused the expansion of capital demand, but also greatly changed the channels and methods of financing, and the financing activities of enterprises were further strengthened. How to raise capital to expand business has become the focus of most enterprises. As a result, many companies have set up a new management department-financial management department, and financial management has begun to separate from enterprise management and become an independent management profession. At that time, the function of enterprise financial management was mainly to predict the amount of funds needed by enterprises and raise the funds needed by enterprises, and financing was the fundamental task of theoretical research on enterprise financial management at that time. So this period is called financing period or financing period.

Statutory financial management period

/kloc-the world economic crisis that broke out in 0/929 and the overall depression of the western economy in the 1930s led to the bankruptcy of many enterprises and serious losses for investors. In order to protect the interests of investors, western governments have strengthened the legal management of the securities market. For example, the United States promulgated the Federal Securities Law and the Securities Exchange Law of 1933 and 1934, which made strict legal provisions on the company's securities financing. At this time, the outstanding problems faced by financial management are the financial market system and related laws and regulations. Financial management first studies and explains various laws and regulations, guides enterprises to form and merge companies in accordance with the requirements of laws and regulations, and issues securities to raise capital. Therefore, western financiers call this period "law-abiding financial management period" or "descriptive legal period".

The research focus of this period is laws and regulations and internal control of enterprises. The main financial research achievements are as follows: "Enterprise Finance" written by W.H.Lough of the United States puts forward for the first time that enterprise finance should not only raise capital, but also effectively manage capital turnover. British T.G.Rose's internal financial theory especially emphasizes the importance of internal financial management, and holds that the effective use of capital is the focus of financial research. After the 1930s, the focus of financial management began to shift from expansionary external financing to defensive internal capital control, and the determination of various financial objectives and budgets, debt restructuring, asset evaluation, and maintaining solvency began to become important contents of financial management research in this period.

Period of asset financial management

After 1950s, faced with fierce market competition and the emergence of buyer's market trend, financial managers generally realized that simply expanding financing scale and increasing product output could not meet the development needs of the new situation. The main task of the financial manager should be to solve the problem of capital utilization efficiency, and the financial decision within the company has risen to the most important issue. Western financiers call this period "internal decision-making period". During this period, the time value of funds has aroused the general concern of financial managers, and the capital budgeting method with fixed assets investment decision as the research object has become increasingly mature. The focus of financial management has shifted from paying attention to external financing to paying attention to the rational allocation of funds within the company, which has made a qualitative leap in the company's financial management. Because asset management has become the top priority of financial management in this period, it is called asset financial management period.

At the end of 1950s, paying attention to and studying the overall value of a company was another remarkable development of financial management theory. In practice, investors and creditors usually determine the value of the company's stocks and bonds according to a series of factors such as the company's profitability, capital structure, dividend policy and operational risk. Therefore, the research on capital structure and dividend policy is highly valued.

The main financial research achievements in this period are as follows: 195 1 year, Joel Dean, an American financier, published the earliest theoretical works on investment finance, which played a decisive role in the rapid development of financial management from financing financial management to asset financial management; 1952, H.M.Markowitz published the paper "Portfolio Selection", and thought that under some reasonable assumptions, the variance of investment return rate is an effective method to measure investment risk. From this basic point of view, from 65438 to 0959, markowitz published the monograph "Portfolio Selection" to study the portfolio problem among various assets from the measurement of returns and risks. Markowitz is also recognized as the founder of modern portfolio theory school; 1958, Franco Modigliani and Merto H. Miller published the Theory of Capital Cost, Corporate Finance and Investment in American Economic Review, and put forward the famous MM theory. Modig Lenny and Miller won the Nobel Prize in Economics in 1985 and 1990 respectively for their outstanding achievements in studying the theory of capital structure. 1964, William Sharpe and lintner put forward the famous CAPM based on Markowitz theory. This paper systematically expounds the relationship between risk and return in asset portfolio, distinguishes systematic risk from non-systematic risk, and clearly puts forward the viewpoint that non-systematic risk can be reduced by diversifying investment. The capital asset pricing model revolutionized the modern portfolio theory, so Sharp and markowitz won the 22nd Nobel Prize in Economics. In a word, during this period, a "new financial theory" was formed, which mainly studied financial decision-making. Its essence is to attach importance to the pre-control of financial management, emphasize the close relationship between the company and its economic environment, and take asset management decision as the center, which has pushed the financial management theory forward a big step.

Investment and financial management period

Since the end of World War II, with the rapid development of science and technology, the speed of product upgrading, the rapid expansion of the international market, the increase of multinational companies, the prosperity of the financial market, the more complicated market environment and the increasing investment risks, enterprises must pay more attention to investment benefits and avoid investment risks, which puts forward higher requirements for existing financial management. After the mid-1960s, the focus of financial management shifted to investment, so it was called the investment and financial management period.

As mentioned above, portfolio theory and capital asset pricing model reveal the relationship between asset risk and its expected rate of return, which is welcomed by the investment community. It not only bases the securities pricing on the interaction between risk and return, but also greatly changes the company's asset selection strategy and investment strategy, and is widely used in the company's capital budget decision. As a result, two independent fields in finance-investment and corporate financial management are combined, and the theory of corporate financial management has entered a new era of investment financial management. The above-mentioned financial research achievements in the asset management period are also the main financial achievements in the primary stage of investment and financial management.

Since 1970s, the innovation of financial instruments has strengthened the connection between companies and financial markets. Warrants and financial futures are widely used in enterprise financing and foreign investment activities, which promotes the development and perfection of financial management theory. In the mid-1970s, Blake and others established the option pricing model (OPM). Stephen ross put forward the arbitrage pricing theory. During this period, modern management science makes the investment management theory mature day by day, which is mainly manifested in: establishing reasonable investment decision-making procedures; A perfect investment decision-making index system has been formed; A set of scientific decision-making methods for venture capital is established.

It is generally believed that the 1970s was the period when western financial management theory came to maturity. Fiberhome Hunting Company believes that financial management has further developed into a management activity integrating financial forecasting, financial decision-making, financial planning, financial control and financial analysis, with fund-raising management, investment management, working capital management and profit distribution management as the main contents, occupying a core position in enterprise management. 1972, Fama and Miller published the book Financial Management, which is a representative work of western financial management theory and marks the maturity of western financial management theory.

The new period of deepening the development of financial management

At the end of 1970s, the financial management of enterprises entered a new period of deepening development, developing towards internationalization, accuracy, computerization and networking.

In the late 1970s and early 1980s, the western world generally suffered from long-term inflation. Large-scale sustained inflation leads to the rapid increase of capital occupation, the increase of financing cost with interest rate, the depreciation of securities, the more difficult for enterprises to raise funds, the inflated profits of the company and the serious loss of funds. Serious inflation has brought a series of unprecedented problems to financial management, so the task of financial management in this period is mainly to deal with inflation. The financial management of inflation once became a hot issue.

Since the middle and late 1980s, import and export trade financing, foreign exchange risk management, international transfer price issues, international investment analysis, and financial performance evaluation of multinational companies have become hot spots in financial management research, and a new branch of finance-international financial management has emerged. International financial management has become a branch of modern finance.

In the middle and late 1980s, developing countries in Latin America, Africa and Southeast Asia fell into a heavy debt crisis. The political situation in the former Soviet Union and Eastern European countries was turbulent and their economies were on the verge of collapse. The United States has a trade deficit and a fiscal deficit, and trade protectionism once prevailed. This series of events led to the turmoil in the international financial market, which made the investment and financing environment faced by enterprises very uncertain. Therefore, enterprises pay more and more attention to the evaluation and avoidance of financial risks in financial decision-making. Therefore, quantitative methods such as utility theory, linear programming, game theory, probability distribution and simulation technology are increasingly applied to financial management. Attach great importance to financial risks and the quantification of financial forecasts and decisions.

With the application of advanced methods and means such as mathematical methods, applied statistics, optimization theory and electronic computer in financial management, the company's financial management theory has undergone a "revolution". Financial analysis is developing rapidly in a precise direction. Financial management information system was born in 1980s.

Since the mid-1990s, computer technology, electronic communication technology and network technology have developed rapidly. A great revolution in financial management-online financial management has quietly arrived.

Western finance is mainly composed of three areas, namely, corporate finance, investment and macro finance. Among them, corporate finance is often translated as "corporate finance" or "enterprise financial management" in China, and has been included in RCA examination since 2000.

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The goal of financial management

Related to financial management objectives-basic viewpoints of various financial management objectives and their advantages and disadvantages evaluation

1. Profit maximization

Basic point of view: profit represents the newly created wealth of the enterprise. The more profit, the more the wealth of the enterprise increases, and the closer it is to the enterprise's goal.

Disadvantages: First, the time value factor of profit is not considered, such as 1 10,000 this year and 1 10,000 next year. Obviously, it is difficult to make a correct judgment at a time point. Secondly, regardless of the relationship between the profit obtained and the invested capital, the profit obtained by investing 50 million yuan in capital is 1 10,000 yuan. If we only look at profits, their contributions to enterprises are the same, but if we consider investment, they are obviously different. Third, we didn't consider the relationship between the profits we made and the risks we took. For example, if we also invest 6.5438+0 million yuan, then we will make a profit of 6.5438+0 million yuan this year. One enterprise will convert all of them into cash, and the other enterprise will all be accounts receivable, which may lead to the irrecoverable loss of bad debts.

2. Maximize earnings per share

Basic point of view: the profit of an enterprise should be considered in connection with the capital invested by shareholders, and the financial management goal of an enterprise should be summarized by earnings per share to avoid one of the defects of the goal of "profit maximization"

Disadvantages: this goal still does not consider the time value factor of earnings per share, in addition, it still does not consider the risk.

Advantages: It solves the defects of profit and capital investment in the "profit maximization goal"

3. Maximize the company's wealth (value)

Basic view: increasing shareholders' wealth is the goal of financial management.

Advantages: this goal solves all three defects in the goal of "profit maximization"

Disadvantages: difficult to measure

4. Maximize related benefits

Basic point of view: consider the interests of creditors, shareholders and other related parties, as well as employees, customers, corporate social responsibility and other factors, and strive to maximize the interests of all parties.

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Content of financial management

1, fund-raising management

2. Investment management

3. Working capital management

4. Profit distribution management Financial management is mainly used to manage all kinds of fund information, including fund application, reimbursement and payment information, such as payment receipt, payment receipt, loan slip, expense application and reimbursement application. The main functions are detailed as follows:

Loan slip

This loan slip is applicable to the loan application and approval of sales, marketing and other departments. When returning, the financial manager needs to confirm the status update of the repayment form and update the return date.

L fee application

Expense application is applicable to the application and approval of expenses of sales, marketing and other departments. Expense application is related to the information of marketing activities and business opportunities, and the input-output ratio of marketing activities and sales can be calculated according to the specific expenses.

L reimbursement application

Reimbursement application is mainly aimed at expense application function. By filling in the reimbursement application, the actual expenditure can be recorded more specifically, and the later budget amount can be effectively controlled according to the comparison between the budget and the actual expenditure.

L involves statements

Reimbursement summary table: according to the applicant of the reimbursement form, the total monthly reimbursement of each person is counted.

Reimbursement Details: Summarize the detailed reimbursement information of each applicant according to the reimbursement form.

Expense application form: summarize the detailed application expense amount of each person according to the expense applicant.

Loan summary table: calculate the monthly loan amount of each person according to the loan applicant.

Loan schedule: summarize the detailed loan information of each person according to the loan applicant.

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Basic theory of financial management

(1) capital structure theory (capital structure)

The theory of capital structure is a theory to study the relationship between the financing mode and structure of a company and its market value. Modigliani and Miller's conclusion in 1958 is that in a perfect and effective financial market, enterprise value has nothing to do with capital structure and dividend policy-MM theory. Miller won the 1990 Nobel Prize in Economics for MM theory, and Modleya won the 1985 Nobel Prize in Economics.

(2) Modern modern portfolio theory and CAPM.

Modern portfolio theory is about the best portfolio. Markowitz put forward this theory in 1952, and his research conclusion is that as long as the returns between different assets do not change the perfect positive correlation, the investment risk can be reduced by portfolio. Markowitz therefore won the Nobel Prize in Economics in 1990.

Capital asset pricing model is a theory to study the relationship between risk and return. Sharp and others come to the conclusion that the risk return rate of a single asset depends on the risk-free return rate, the risk return rate of market portfolio and the risk of risky assets. Sharp won the 1990 Nobel Prize in Economics.

(3) Option pricing model.

Option pricing theory is a theory about determining the value or theoretical price of options (stock options, foreign exchange options, stock index options, convertible bonds, convertible preferred stocks, warrants, etc.). ) 5438+0973 Scholes proposed an option pricing model, also known as B-S model .90.