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Strategic Financial Management Overview

Strategic financial management is a long-term approach that uses financial tools to develop and implement strategies to achieve objectives. It aims to maximize profit and shareholder value through both structured and flexible processes. Strategic financial management helps formulate, monitor, and revise strategies to meet long-term goals using qualitative and quantitative analysis. Key decisions include investments, financing, profit/wealth maximization, and measuring shareholder value creation using metrics like economic value added and market value added.

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23 views7 pages

Strategic Financial Management Overview

Strategic financial management is a long-term approach that uses financial tools to develop and implement strategies to achieve objectives. It aims to maximize profit and shareholder value through both structured and flexible processes. Strategic financial management helps formulate, monitor, and revise strategies to meet long-term goals using qualitative and quantitative analysis. Key decisions include investments, financing, profit/wealth maximization, and measuring shareholder value creation using metrics like economic value added and market value added.

Uploaded by

sim waraich
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

Strategic Financial Management

Introduction
Strategic Financial management is a
management approach which makes use of
various financial tools and techniques in order
to come up with a strategic decision plan. It
also ensures the implementation of the chosen
strategy so as to achieve the desired
objectives.
Characteristics of SFM
1. Concerned with the long term management of fund
with a strategic perspective
2. Aims at maximisation of profit and wealth of the
concern
3. Both structured as well as flexible
4. Promotes growth, profitability and maximises
shareholder value
5. Evolving and continuous process, tries to adopt and
revise strategies in order to achieve strategic
financial objectives of the firm.
6. Helps to formulate appropriate strategies and
facilitates constant monitoring of action plans to
match with the long term objectives.
7. Makes use of analytical financial techniques with
qualitative and quantitative judgment on factual
information
9. Result oriented combining of resources, especially
of financial and economic resources
10. Offers a number of solutions while analysing the
problems in the organisational context.
Decisions in SFM

1. Decisions regarding investments in the


assets of the company

2. Decisions regarding how such investments


should be financed
Financial Goals And Strategy

1. Profit maximisation

2. Wealth maximisation
Measuring Shareholders Value
Creation
1. Economic Value Added [EVA]
EVA = NOPAT – Invested Capital x WACC
NOPAT = PBIT [1-T] = PAT + INT [1-T]
OR
EVA = [RATE OF RETURN – COST OF
CAPITAL] X CAPITAL

2. Market Value Added [MVA]

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