Tips to crack Financial Management

Hey ya!

Here are some tips to crack a practical subject like FM.

To do anything practically, you need to understand the main concept and why is it learnt.. then only you would be able to solve the sums.

Let me give a brief overview of Financial Management–

Finance is the backbone of every business. It’s management is necessary for the smooth functioning of all the activities. It is to be studied to know the basis of managing finance in real terms of the world.

 Working Capital Management-
Working Capital Management refers to Current Assets – Current Liabilities. In other words, Working capital means the difference of what we are about to receive or received in short term and what we are supposed to pay in short term. It normally comprises of sums for calculation of increase or decrease in working capital.

 Cash management-
Cash management implies management of cash flow in the business on daily basis. It represents the outflow and inflow of cash by various operations. Cash management generally involves sums where there is calculation of cash outflow and cash inflow.

 Cash Budget-
It refers to an estimate of cash expenses and incomes through a quarter or six months. Here all the expenses and incomes are put in the form of a budget and the closing balance of one month becomes the opening balance of another month. Cash budget is necessary in order to set the insight into the cash outflow and inflow in a particular month and accordingly preparing a budget of it so that it can be used in planning and controlling the expenditure over and above the required limits.

 Capital Budget –
Capital Budgeting mainly aims at estimating the returns that we get on a particular investment. It involves the calculation of payback period, net present value, profitability index, internal rate of return and so on. All this ultimately refers to the returns received on a particular investment in a project or purchase of machinery which is over a period of years.

 Business restructuring-
It normally refers to restructuring of business either internally or externally. Internally reconstructing business involves the management of liabilities and assets and accordingly bringing the business to a better position. It involves reducing the paid up value of shares, reducing the claims of outside liabilities, writing off the fictitious assets and many other entries that are done to manage the liabilities in such a way that the business is back on track. It is normally done when the business is running in severe losses and is almost in the state of getting liquidated or sells off.

Question Paper Pattern-(subject to changes)
Section I
Q. 1) Concepts – 12 marks (4 concepts for 3 marks, explain in atleast 3/4th page)
Q.2) Case studies – 18 marks (2 cases for 9 marks or 1 case for 18 marks)

Section II – 30 marks (includes sums and long answers) (Long answers can be 3 pages)

Be clear with the concepts, maximum practice required for practical sums and proper working note in detail should be done. First basically read the problem in detail and then go for attempting it. Every detail should be kept in mind before solving the sum. Formula should be understood and known where to apply. Make a list of formulas and keep on reading it before the exams. Recheck the mathematical calculations again as if 1 step goes wrong, the whole sum goes wrong. Steps do contain marks. So solve the sum properly and neatly. Underline or make a box of the final answer you got.

Theory questions should be precise and should contain maximum points. It can be 2-3 pages (as u wish). But more than the quantity, quality matters. So, make sure you write answers in point-form and underline the important words.

Best of Luck!

🙂