MBA in Finance or Financial Management is one of the most sought specializations for business management graduates.
Graduates with expertise in financial management are essential to facilitate business operations or investment management for corporate finance & capital gains.
The world of finance offers tremendous career opportunities and is one of the most popular MBA specializations offered at business schools in India.
MBA in financial management curriculum provides expertise in financial accounting, capital management, debt financing, mortgage lending, & portfolio management.
Students with a good background in economics, accounting, and statistics can pursue a career in financial management.
Multinational corporations, banking institutions, investment banking firms, and various business organizations hire financial managers.
MBA in Financial Management courses offers the highest salary packages since effective and efficient management of business capital & investments is essential for the survival of any business organization.
In the article, we are going to learn about
What is financial management?
Why study MBA in financial management?
Subjects taught under financial management
Job opportunities after pursuing a career in finance
What is Financial Management?
In business management, financial management is a broad area of study, and we must know the effective management of funds for cash flow and capital gains.
Money is a tool used as a debt to create prosperity and abundance in human society.
In the modern world, the printed currency is essential to facilitate the exchange of goods and services among traders and consumers.
Debt financing is the way to print money out of thin air by banking organizations everywhere in the world.
More circulation of money into the market leads to inflation, deflation, trade deficit, and higher taxes on goods and services.
Economists across the world may have different perspectives on money.
But all nations must deal with the effects of debt financing to facilitate trade and business.
Capitalists control more than 50% of the money in circulation since they effectively and efficiently use debt financing to start businesses, provide jobs and facilitate development.
The government collects taxes for infrastructure development and provides facilities to the poor and middle-class people, including free education, housing, etc.
People trade their labor and skills for money to fulfill their basic needs of food, shelter, and clothing.
Employability makes a person capable of earning a good income in our highly competitive society.
A basic understanding of personal finance can lead employees and self-employed people to earn infinite returns on their earned income.
People generally invest their earned income for capital gain or cash flow in real estate, business, paper assets (bonds, stocks, mutual funds), and commodities (food, oil, gold, silver).
Financial managers help to manage wealth for capital gains and fund management for corporate finance.
The growing demand for financial managers leads to various offline and online courses in financial management.
MBA in Financial Management
Masters in Business Management is a 2 yrs full-time program that covers various aspects of finance, operations, marketing & communications, human resource management, business analytics, entrepreneurship, etc.
Financial management is a business function associated with working capital management (profitability, expenses, cash, and credit).
Financial managers effectively and efficiently manage the capital funds to carry out the daily operations of an organization.
Strategic financial management maximizes the value of a firm for its stakeholders by capital raising & allocation of funds to business units or products.
Objectives of Finacial Management:
Profit Maximization
Maintain proper cash flow for expenses such as raw materials, electricity bills, wages, rent, etc.
Minimization of capital cost to help gain more profit in operations.
Budget analysis to forecast funding requirements.
Determine capital structure to finance overall operations through equity or debt.
Subjects taught under Financial Management
MBA in Financial management deals with managerial finance, corporate finance and investment management.
Managerial Finance
Managerial finance is concerned with the administration of an organization by implementing finance techniques and theories such as accounting and corporate finance for optimizing profitability and performance.
Managerial accounting techniques are helpful in the preparation and presentation of financially oriented information.
Management accounting and financial analysis techniques accurately assess the results and performance of business units and monitor resource allocation within an organization.
Financial statements are the report cards of a business organization’s performance.
Income statements are the records of financial transactions that determine the overall financial performance of a company.
Accountants prepare financial statements.
Financial statements are essential for tax filing, debt financing, or raising capital through equity investment.
A balance sheet reports on a company’s assets and liabilities.
Income statements determine profit or loss in business operations.
A positive cash flow statement is essential for the long-term survival of a business entity.
Therefore all organizations employ financial managers to prepare financial statements for their business operations.
Cash flow statements are essential for debt financing from private or government banking institutions.
Financial statements are also helpful in raising capital through stocks and bond offerings or private equity investment by venture capitalists.
Objectives of financial managers in an organization include:
Profitability and Cost Analysis
Budget Analysis
Cash Flow Forecast
Activity Based Costing
Working Capital Management (Asset, Liabilities, Cash Flow)
Capital Budgeting (Funding of Project)
Capital Structure (Equity and Debt)
Corporate Finance
Corporate finance deals with the source of funding, the capital structure of corporations, actions to increase the firm’s value for its shareholders, and tools and analyses used to allocate financial resources.
Capital budgeting and working capital management are the main functions of corporate finance.
The major capital expenditures for an organization are setting up new production units, buying machinery, replacing & maintaining machinery, new products, and investments in research and development.
Capital budgeting is the planning process for long-term capital investment through debt, equity, or previous business revenue.
Working capital is the total gross profit in a business venture after subtracting the cost incurred in manufacturing and selling products and services.
Working capital is the positive cash flow through a business’s assets and liabilities.
A working capital deficit will lead to a liquidity crisis and closure of business operations.
Working capital management is essential for daily business operations, inventory management, and short-term financing.
Capital finance sources for business operations include debt, equity, and stock offerings.
Debt:
Debt is a source of business capital that usually comes from bank loans or issuing bonds to the public.
Bonds and bank loans usually incur regular interest payments on the borrowed capital for a fixed period to clear all the obligations.
Equity Capital:
Corporations can sell shares of a company to an investor to raise business capital.
Capital invested in a company increases the value of a firm by earning positive returns.
Shareholders invest in shares of a stock for capital gain and dividend payments.
Private Equity Investment:
A venture capitalist or angel investor invests in limited liability corporations that can become profitable business models.
Private equity investment is also helpful in corporate restructuring to enable mergers and accusations by other firms.
Financial risk management:
Financial risk management is the process of protecting the economic value of a firm by minimizing exposure to financial risk.
Banking institutions suffer from financial risk due to loan default.
Default on mortgage payments for credit cards, home loans, and car loans can have devastating effects on banking institutions.
In corporate finance, financial risk is concerned with the loss of business revenue that can lead to a decline in the intrinsic value of a business or its share.
Fund managers minimize financial risk by investing in a diversified portfolio of stocks, bonds, derivatives & mutual funds.
Financial risk management techniques optimize business revenue by minimizing the potential impact of financial losses on short-term performance.
Investment Banking
Investment banking is a division of corporate finance that offers financial advice to corporations, individuals, and governments.
Financial service institutions encompass investment banking firms, venture capitalists, credit rating agencies, non-banking financial companies (NBFC), and insurance companies.
Investment banking is a financial services company that evaluates an organization’s financial needs.
Investment bankers assist in corporate finance to raise financial capital through debt and equity securities.
Investment banks also provide assistance for mergers and acquisitions and trading of equity securities, & derivatives.
Top Investment bankers in the world are Goldman Sachs, Morgan Stanley, JP Morgan, Bank of America (BofA), Citi Group, Credit Suisse, and Barclays.
Objectives of investment banks include:
Corporate finance
Mergers and acquisitions
Securities trading
Promotion of securities
Advice institutions that buy wealth management services (private equity, mutual funds, insurance policy, stocks, bonds & derivatives)
Private Equity:
Private equity is an investment fund that buy and restructure companies for mergers and acquisitions.
Private equity firms invests in limited liability corporations not listed on a stock exchange.
A private equity firm, venture capitalist, or angel investor generally makes a private equity investment for maximum return on investments.
Venture capitalists invest in high-growth technology-enabled startups.
Top Venture Capitalist firms are:
Sequoia Capital
Khosla Venture
Tiger Global Management
Y Combinator
Soft Bank Vision Fund
Credit Rating Agency:
Credit rating agencies provide credit ratings to debt instruments of public and private companies that determine the debtor’s ability to pay back the principal and interest without default.
Debt instruments include government bonds, corporate bonds, municipal bonds, mortgage-backed securities, and collateralized debt obligations.
A good rating improves the confidence of investors to invest in public and private companies’ bonds.
Top credit rating agencies are:
Moody’s Investor Service
S&P Global Ratings
Fitch Ratings
Non-Banking Financial Companies:
Non-Banking Financial Institutions provides financial services such as business loans, consumer loans, and insurance services to individuals and micro, small, and medium-sized organizations.
NBFCs provide wealth management services for publicly traded companies.
The top NBFCs in India are:
Bajaj Finance Limited
Mahindra Finance
Muthoot Finance
Tata Capital Finacial Services Ltd.
Aditya Birla Finance
Insurance Companies:
Insurance companies provide policies to hedge against financial losses in exchange for a fee.
A person who buys insurance is called a policyholder, and the person or entity covered is known as insured.
It is a form of risk management service from uncertain losses.
Types of insurance policies include:
Vehicle insurance
Health insurance
Life insurance
Property insurance
Liability or credit insurance
Asset Management Company (AMC):
Investment management firms serve smaller investors to earn better capital gains by investing in a diversified portfolio of paper assets.
Paper assets include stocks, bonds, derivatives, mutual funds, and fixed deposits.
Investing in a paper asset is more economical for most smaller investors.
Mutual funds companies offer a diversified portfolio of stocks, & bonds for a better return on investments compared to bank deposits.
Top AMC Companies in India are:
BlackRock
Vanguard Group
Prudential Financial
Invesco Ltd.
SBI Mutual Fund
Axis Mutual Fund
Kotak Mutual Fund
Job opportunities after pursuing MBA in Finance
MBA in financial management offers excellent career opportunities for young graduates.
Financial managers earn a decent salary as per their job roles.
Investment management companies usually hire MBA graduates with a specialization in financial management.
Accountants and financial managers have job opportunities in all types of business organizations.
Financial management courses also offer self-employment job opportunities as stock brokers & financial advisors.
Different job roles for financial managers are:
Private Equity Manager
Investment Manager
Investor Relations Manager
Financial Advisor
Fund Manager
Financial Analyst
Budget Analyst
Accounting Manager
Chief Financial Officer
Equity Research Analyst
Investment Banker
Portfolio Manager
Financial Risk Advisor
Trends in Finance & Investment Management:
The rise of fintech companies has revolutionized the world of finance.
Billions of money travel across the globe every day through digital payments.
Financial Technology or Fintech companies using IT technology have replaced traditional methods of financial services.
Computers & smartphones for mobile banking, investing, borrowing, and insurance have helped financial institutions offer faster and simpler retail banking, finance, and investment services.
Fintech companies for retail banking include Google Pay, Paytm, Razorpay, PhonePe, PayPal, & PayU.
Fintech companies for investment, trading and financial services include ET Money, Policy Bazaar, Groww, etc.
Faqs about MBA in Financial Management
A) Job roles of financial managers include managerial accounting, budgeting, working capital management, corporate finance, & financial risk management.
A) Financial management services include corporate finance for businesses & personal finance for individuals, such as raising capital through debt and equity, mergers and acquisitions, private equity investment, asset management, trading in securities, and portfolio management.
A) Completed graduation through a classroom-based program with a minimum 50% marks in graduation and appeared in any of the MBA entrance tests such as CAT, MAT, CMAT, or XAT. with basic knowledge in economics, accounting, mathematics, and statistics.
A) Indian Institute of Management, Xavier Insitute of Management, S.P. Jain Institute of Management, Management Development Institute, Symbiosis Institute of Business Management, T.A. Pai Management Institute, Birla Institute of Management Technology, Fore School of Management.
A) Financial Managers earn a good salary starting with a minimum package of 4 to 6 lakh INR which goes up to 12 to 16 lakh INR in top MNC companies.
A) MBA in financial management includes study of economics, accounting, managerial finance, corporate finance and investment management.
A) MBA program fee starts from 3 to 5 lakh INR in tier 2 business schools and goes up to 7 to 15 lakh for two years of a full-time classroom-based PGDM or MBA program.
Conclusion:
We don’t render any financial services.
The information provided in this article is based on research and findings.
Finance is among the most popular MBA specializations that offer diverse career opportunities.
Managerial finance deals with accounting, budgeting, and working capital management.
Raising capital for investment in businesses through debt financing or equity investment is known as corporate finance.
Investment management firms deal with corporate finance and individual financial services.
It is a division of corporate finance that encompasses various institutions such as investment bankers, private equity investors, credit rating agencies, insurance companies, asset management firms, non-banking financial companies, and fintech companies.
Financial managers have excellent career opportunities in corporate finance, personal finance, and managerial finance.
However, knowledge of accounting, mathematics, economics, and statistics is required to pursue MBA in financial management.
We hope you find the information appropriate about financial management.
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