CHAPTER I INTRODUCTION

FINANCE : Finance is a branch of economics concerned with resource allocation as well as resource management, acquisition and investment. Simply, finance deals with matters related to money and the markets. In general term finance means management of money for your expenses. In broad term finance is the science of funds management. Finance includes saving money and often includes lending money. The general areas of finance are business finance, personal finance, and public finance. Finance is also a money budget management. The field of finance deals with how money is spent and budgeted. It also deals the concepts of time, money and risk and how they are interrelated. Finance is used by individuals as personal finance, by governments as public finance, by businesses as corporate finance, as well as by a wide variety of organizations including schools and non-profit organizations. Finance is the need of the today world economy.

TYPES OF FINANCE There are mainly two type of finance found in the current economy. 1. PERSONAL FINANCE In this finance decisions may involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement. Personal financial decisions may also involve paying for a loan, or debt obligations. 2. CORPORATE FINANCE It is the task of providing the funds for a corporation's activities. Corporate finance can easily categorized in two category. First one is Short term finance which generally involves balancing risk and profitability, while attempting to maximize an entity's wealth and the value of its stock. MEANING OF FINANCIAL MANAGEMENT Financial Management means planning, organizing,

directing and controlling the financial activities such as

procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise. FINANCIAL PERFORMANCE ANALYSIS : A historical financial performance engagement is an analysis of a companys past and current financial performance and compares such performance to similar sized companies within its industry providing insight into a companys historical growth, profitability, debt capacity and overall liquidity. All such factors can be important indicators of a companys ultimate value. We analyze the past five-year history of financial statements as well as financial information relative to your industry. We calculate financial ratios (liquidity, coverage, leverage and operating) for the company, prepare common size financial statements, and analyze the information on a trended and composite basis. BENEFITS OF FINANCIAL PERFORMANCE ANALYSIS : A financial performance analysis may provide the following benefits:

 Identify financial strengths and weaknesses and evaluate financial performance in relation to the industry performance as a whole, and acquire useful information concerning competitors. Historical financial ratio analysis can be used as an effective preliminary step in preparing a budget or in making a forecast. Evaluate past performance and set objectives for future performance. Also provides an ongoing means to evaluate a companys performance financially. Evaluate a proposed sale, merger or acquisition. Determine the financial strengths and weaknesses of the company and ultimately the transaction. A greater awareness of financial statements and their interrelationship can lead to improved profitability or cash flow. STEPS FOR FINANCIAL PERFORMANCE ANALYSIS :
1. Collection of data of the chosen company from the

financial websites.

2. Computation of ratios under various heads of liquidity,

profitability, long-term solvency, turnover ratios etc.

number of previous years ratios.

of

companys

performance

with

the

performance of a competitors company, if the analysis so requires.

performance with the industry averages to find out the companys position in the industry as a whole.
7. Formation of tables, charts, diagrams etc. as required. 8. Good

interpretation

of

the

analysis

and

proper

conclusion.