FINANCIAL MANAGEMENT
MASTER EXAM SUMMARY
(Exam Preparation Study Guide)
1. INTRODUCTION TO FINANCE
Definition of Finance
Finance is the science and art of managing money.
Science Component
Finance uses:
• mathematics
• financial models
• calculations
• quantitative analysis
Art Component
Finance also requires:
• judgement
• experience
• decision-making under uncertainty
2. TYPES OF FINANCE
Personal Finance
Personal finance focuses on individual financial decisions such as:
• spending
• saving
• investing
Example:
Income = R10 000
Decision → how much to consume, save, or invest
Business Finance
Business finance deals with financial decisions of companies.
Companies must decide:
How to raise funds
• loans
• shares
• bonds
Where to invest funds
• equipment
• expansion
• projects
How to use profits
• reinvest
• pay dividends
, 3. FINANCIAL SERVICES VS MANAGERIAL FINANCE
Financial Services
External financial services include:
• banking
• insurance
• investment management
• financial planning
• real estate services
Managerial Finance
Managerial finance focuses on internal financial decisions inside companies.
Financial managers are responsible for:
• budgeting
• investment evaluation
• raising capital
• credit decisions
• risk management
4. LEGAL FORMS OF BUSINESS
Sole Proprietorship
Advantages
• easy to start
• full control
• low regulation
Disadvantages
• unlimited liability
• difficult to raise capital
• business ends if owner leaves
Partnership
Advantages
• more capital
• shared skills
• shared management
Disadvantages
• shared liability
• conflict between partners
• profit sharing
Company (Corporation)
Advantages
• limited liability
• easier to raise capital
• perpetual existence
MASTER EXAM SUMMARY
(Exam Preparation Study Guide)
1. INTRODUCTION TO FINANCE
Definition of Finance
Finance is the science and art of managing money.
Science Component
Finance uses:
• mathematics
• financial models
• calculations
• quantitative analysis
Art Component
Finance also requires:
• judgement
• experience
• decision-making under uncertainty
2. TYPES OF FINANCE
Personal Finance
Personal finance focuses on individual financial decisions such as:
• spending
• saving
• investing
Example:
Income = R10 000
Decision → how much to consume, save, or invest
Business Finance
Business finance deals with financial decisions of companies.
Companies must decide:
How to raise funds
• loans
• shares
• bonds
Where to invest funds
• equipment
• expansion
• projects
How to use profits
• reinvest
• pay dividends
, 3. FINANCIAL SERVICES VS MANAGERIAL FINANCE
Financial Services
External financial services include:
• banking
• insurance
• investment management
• financial planning
• real estate services
Managerial Finance
Managerial finance focuses on internal financial decisions inside companies.
Financial managers are responsible for:
• budgeting
• investment evaluation
• raising capital
• credit decisions
• risk management
4. LEGAL FORMS OF BUSINESS
Sole Proprietorship
Advantages
• easy to start
• full control
• low regulation
Disadvantages
• unlimited liability
• difficult to raise capital
• business ends if owner leaves
Partnership
Advantages
• more capital
• shared skills
• shared management
Disadvantages
• shared liability
• conflict between partners
• profit sharing
Company (Corporation)
Advantages
• limited liability
• easier to raise capital
• perpetual existence
