1.1 Overview

財務管理的職能主要有三方面：投資決策；融資決策；資產管理決策。

Financial management is concerned with three major areas:investment, financing, and management of assets with some overall goals in mind.

Corporations need variety of real assets, both tangible and intangible, such as equipment, factories, materials, trademark and patents to carry on business. All of these assets need to be paid for. To obtain necessary money, the corporation could borrow from the bank, or sell share of stock /bond. Thus, financial managers are confronted with two basic questions. First, what assets should the firm invest in?Second, how should the cash for the investment be raised?The answer to them is the firm's investment decision and financing decision respectively.

Investment decision is the most important of the firm's three major decisions when it comes to value creation. The financial manager needs to identify investment opportunities among business chaos, and evaluate the projects with recognition of the risk associated with the project. Normally a risky investment is expected to generate higher return, yet it is not always the case in practice. The risk must be cooperated with investment decision therefore managers need to understand how to measure the risk and return. Anyhow, once the project is considered to be worthwhile, the next question is that how the project should be financed.

Financing decision comes after potential investment appears. Financial managers need to take a close look at financial market where the necessary fund comes from, and understand how the financial market works first. Which market is better for raising certain cash? What financial resources available to them? We can see that some companies have large amount of debt, whereas others are almost debt free（such as Lao Ganma）, some company issuing share in overseas capital market even its major business in home country, some company sell bonds rather than borrowing from bank. Does the type of financing employed make a difference? If so, why? Or, can a certain mix of financing be thought of as best？

Another area related to financing decision is dividend policy. How much should the company pay out to its shareholders? More earnings paying out to shareholders means fewer cash retained in the company and the company probably can't afford potential investment. Would the shareholders be happy about that dividend policy？

Asset management decision is the third area that we can't ignore. Once the project（or assets）is being undertaken and appropriate financing provided, the assets must still be managed efficiently. In fact, the job of financial management is largely devoted to day-to-day operational activities, which involve current assets and current liability, say, working capital management. Working capital management is vital for business survival.