Financial Management

Topics: Finance, Business, Investment Pages: 42 (14165 words) Published: March 22, 2011
Unit structure:
1. Introduction
2. Learning objectives
3. Section title
Advantages of wealth maximization
Criticisms of wealth maximization
Scope & Functions of Financial Management
Role and function of the finance manager
Financial Management and Economic
Financial management and Accounting
Evolution of financial management
Functional areas of financial management
Financial decisions
Have you understood questions
Financial Management - AV OVERVIEW

Meaning - Objectives of Financial Management- ‘A’s of Financial Management - Scope and Functions of Financial Management - Role and Functions of the Financial Manager - Financial Management and Economics – Financial Management and Accounting - Evolution of Financial Management – Functional Areas Financial Management - Financial Decisions - Financial requirement decisions - Investment decision - Financing decision - Dividend decisions Problems - Review Questions and Quiz. 1. INTRODUCTION

Financial management is an appendage of the finance function. We have already discussed the finance function and its significance. With the creation of a complex industrial structure, this function has grown so much that is has given birth to a separate subject — Financial Management - which is today recognized as the most important branch of business administration. One cannot think of any business act in isolation from its financial implications. The management may accept or reject a business proposition on the basis of its financial viabilities. In other words, financial considerations reign supreme particularly for line executives who are directly involved in the decision-making process. In this connection, Howard and Upton observe: “Financial management involves the application of general management principles to a particular financial operation”. 2. LEARING OBJECTIVES

On going through this lesson, you will be conversant with
• The meaning of finance & financial management
• The objectives of financial management
• Advantages & criticisms on the objective of financial management • Scope and functions of finance manager
• Finance and other related subjects
• The Functional areas of financial management
• The process of financial management
• The process of financial decisions

Financial management is that part of management which is concerned mainly with raising funds in the most economic arid suitable manner; using these funds as profitably (for a given risk level) as possible; planning future operations; and controlling current performances and future developments through financial accounting, cost accounting, budgeting, statistics and other means. It guides investment where opportunity is the greatest, producing relatively uniform yardsticks for judging most of firm’s operations and projects, and is continually concerned with achieving an adequate rate of return on investment, as this is necessary for survival and attracting new capital. It is an excellent tool by means of which and pay-off capacities. Certain uniform norms for financial considerations have to be set up to enable an enterprise to judge its activities properly. Financial management provides the best guide for future resource allocation by a firm. It provides relatively uniform yardsticks for judging most of the enterprise’s operations and projects. Financial management implies the designing and implementation of a certain plan. Plans aim at an effective utilization of funds. In the words of James Van Horne: “Planning is an inextricable dimension of financial management. The term ‘financial management’ connotes that funds flow are directed according to some plan. “Financial management connotes responsibility for obtaining and effectively utilizing funds necessary for the efficient operation of an enterprise. The finance function...
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