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KAMAL MUSTAFA

KAMAL MUSTAFA. ACCA (UK) MSC (UK) MBA (UK) DMS (UK) DEM (UK). FINANCIAL DECISION MAKING. COURSE CONTENTS THE FOUNDATIONS THE FIRM AND ITS OPERATIONS WORKING CAPITAL MANAGEMENT INVESTMENT POLICY FINANCING DECISIONS DIVIDEND POLICIES AND DECISIONS. FINANCIAL DECISION MAKING.

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KAMAL MUSTAFA

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  1. KAMAL MUSTAFA ACCA (UK) MSC (UK) MBA (UK) DMS (UK) DEM (UK)

  2. FINANCIAL DECISION MAKING COURSE CONTENTS • THE FOUNDATIONS • THE FIRM AND ITS OPERATIONS • WORKING CAPITAL MANAGEMENT • INVESTMENT POLICY • FINANCING DECISIONS • DIVIDEND POLICIES AND DECISIONS

  3. FINANCIAL DECISION MAKING COURSE CONTENTS • THE FOUNDATIONS • OVERVIEW OF FINANCIAL MANAGEMENT • ECONOMIC ENVIRONMENT FOR BUSINESS • FINANCIAL SECURITIES AN MARKETS • A REVIEW OF FINANCIAL ACCOUNTING

  4. FINANCIAL DECISION MAKING COURSE CONTENTS 2. THE FIRM AND ITS OPERATIONS • FINANCIAL STATEMENTS • FINANCIAL ANALYSIS • PROFIT PLANNING • LEVERAGE

  5. FINANCIAL DECISION MAKING COURSE CONTENTS 3. WORKING CAPITAL MANAGEMENT • INTRODUCTION OF WORKING CAPITAL • CASH MANAGEMENT • MANAGEMENT OF RECEIVABLES (DEBTORS) • MANAGEMENT OF STOCK

  6. FINANCIAL DECISION MAKING COURSE CONTENTS 4. INVESTMENT POLICY • CAPITAL BUDGETING • RISK AND REQUIRED RETURN • VALUATION OF THE FIRM • MERGERS AND ACQUISTIONS

  7. FINANCIAL DECISION MAKING COURSE CONTENTS 5. FINANCING DECISIONS • SOURCE OF SHORT AND INTERMEDIATE-TERM FINANCING • LONG TERM FINANCING DECISIONS • LEASE-BUY DECISIONS

  8. FINANCIAL DECISION MAKING COURSE CONTENTS 6. DIVIDEND DECISIONS • DIVIDEND POLICIES AND DECISIONS

  9. OVERVIEW OF FINANCIAL MANAGEMENT DIAGRAM

  10. OVERVIEW OF FINANCIAL MANAGEMENT • EXAMPLE: AT THE END OF 2012 BRITISH AIRWAYS MADE AN ANNOUNCEMENT, AS PART OF A STOCK MARKET BRIEFING, THAT THEIR QUARTER 4 PROFITS HAD RISEN BY 30%. IMMEDIATELY AFTER THE ANNOUNCEMENT THE SHARE PRICE FELL REQUIRED: • A) DISCUSS WHY SHAREHOLDERS MIGHT BE DISSATISFIED, DESPITE HIGHER PROFITS?

  11. OVERVIEW OF FINANCIAL MANAGEMENT ANSWER PROFITS ARE HISTORIC, SHAREHOLDERS CARE ABOUT THE FUTURE – PERHAPS THEY CONCERNED WHERE BA WERE PLANNING TO INVEST? THEREFORE INVESTMENT DECISIONS ARE VERY IMPORTANT TO INVESTORS

  12. OVERVIEW OF FINANCIAL MANAGEMENT ANSWER • INVESTMENT DECISIONS REQUIRE NEW FINANCE, SHAREHOLDERS CARE ABOUT DEBTLEVELS • PERHAPS THEY CONCERNED INVESTMENT INFORMATION THEREFORE FINANCING DECISIONS ARE VERY IMPORTANT TO INVESTORS

  13. OVERVIEW OF FINANCIAL MANAGEMENT ANSWER PROFITS ARE NOT CASH FLOWS, SHAREHOLDERS OFTEN WANT TO SEE RETURNS THEY WILL BE GETTING AS DIVIDENDS. THEREFORE DIVIDEND DECISIONS ARE VERY IMPORTANT TO INVESTORS

  14. OVERVIEW OF FINANCIAL MANAGEMENT • ENCOURAGING SHAREHOLDER WEALTH MAXIMISATION • PROBLEMS?

  15. OVERVIEW OF FINANCIAL MANAGEMENT AGENCY THEORY • THE DANGER THAT MANAGERS MAY NOT ACT IN THE BEST INTEREST OF SHAREHOLDERS IS REFERRED TO AS THE AGENCY PROBLEM

  16. OVERVIEW OF FINANCIAL MANAGEMENT AGENCY THEORY • Q: WHY DO MANAGERS AND OTHERS AGENTS OF THE SHAREHOLDERS, SUCH AS EMPLOYEES SOMETIMES HAVE DIFFERENT OBJECTIVES?

  17. OVERVIEW OF FINANCIAL MANAGEMENT UNLESS THEY ARE ALSO OWNERS OF THE BUSINESS, MANAGER MAY PREFER TO : • MAXIMISE SHORT-TERM PROFITS • MINIMISE DIVIDENDS • REDUCE RISK BY DIVERSIFYING • BOOST THEIR OWN PAY & PERKS • AVOID DEBT FINANCE

  18. OVERVIEW OF FINANCIAL MANAGEMENT • THE DANGER THAT MANAGERS MAY NOT ACT IN THE BEST INTEREST OF SHAREHOLDERS IS REFERRED TO AS THE AGENCY PROBLEM • IT CAN BE DEALT BY MONITORING THE ACTIONS OF MANAGEMENT PERFORMANCE OR BY THE USE OF INCENTIVE SCHEMES

  19. OVERVIEW OF FINANCIAL MANAGEMENT • HOW TO DEAL WITH AGENCY PROBLEM?

  20. OVERVIEW OF FINANCIAL MANAGEMENT CORPORATE GOVERNANCE WHAT IS CORPORATE GOVERNANCE?

  21. OVERVIEW OF FINANCIAL MANAGEMENT • IN THE UK CORPORATE GOVERNANCE REGULATIONS HAVE BEEN DESIGNED TO MONITOR THE ACTIONS OF MANAGEMENT

  22. OVERVIEW OF FINANCIAL MANAGEMENT HERE SOME OF THE MAIN REQUIRMENTS: • BOARD OF DIRECTORS • KEY COMMITTEES

  23. OVERVIEW OF FINANCIAL MANAGEMENT BOARD OF DIRECTORS • SEPARATE MD & CHAIRMAN • MINIMUM 50% NON-EXECUTIVE DIRECTORS • CHAIRMAN INDEPENDENT • MAX 1 YEAR NOTICE PERIOD • NEDS SHOULD BE INDEPENDENT (3 YEARS CONTRACT, NO SHARE OPTION)

  24. OVERVIEW OF FINANCIAL MANAGEMENT KEY COMMITTEES • REMUNERATION COMMITTEE • PAY & INCENTIVES OF EXECUTIVE DIRECTORS • NEDs ONLY

  25. OVERVIEW OF FINANCIAL MANAGEMENT KEY COMMITTEES 2. AUDIT COMMITTEE • RISK MANAGEMENT • NEDs ONLY

  26. OVERVIEW OF FINANCIAL MANAGEMENT KEY COMMITTEES 3. NOMINATION COMMITTEE • CHOICE OF NEW DIRECTORS • NEDs ONLY

  27. OVERVIEW OF FINANCIAL MANAGEMENT INCENTIVE SCHEMES – TWO MAIN TYPES 1. PERFORMANCE RELATED PAY : • EITHER AGAINST PROFIT OR A STRATEGIC PERFORMANCE MEASURE 2. SHARE OPTIONS: • OPTIONS TO BUY SHARES IN SAY 3 YEARS TIME AT TODAY’S SHARE PRICE

  28. SUMMARY OF TODAY CLASS • MAXIMISATION OF SH WEALTH • ENCOURAGED BY CORPORATE GOVERNANCE • COMMITTEES • MAIN DECISIONS • INVESTMENT, FINANCING & DIVIDEND

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