Nature of Financial Management
Nature of Financial Management
Financial Management Defined * It refers to that part of the management activity which is concerned with the planning and controlling of firms financial resources. * Financial management is concerned with raising financial resources and their effective utilization towards achieving organizational goals. It is the process of putting the available funds to the best advantage from the long term point of view of business objectives.
Purpose of Financial Management * Primary Objective * Maximization of return to the shareholder * Secondary Objectives * Customer Satisfaction * Reduce Misuse of Funds * Increase in Market Shares * Growth * Survival * Innovation
Scope of Financial Management
1. Estimating the Financial Requirement * The finance executives have to estimate the amount of fixed capital and working capital required in a given period of time.
2. Investment Decision * The funds raised from different resources are to be intelligently invested in various assets as to optimize their return of investment.
3. Management of cash flows * Cash is needed to pay off creditors, for purchase of materials, pay labor and to meet everyday expenses. There should not be shortage of cash at any time as it will damage credit-worthiness of the company.
4. Management of earnings * The finance executive has to decide about allocation of earnings among several competitive needs.
5. Choice of sources of finance * Finance executives have to evaluate and choose the best source.
Functions of Financial Management
1. Procurement of short term and long term funds from financial institutions. * Capital must be made available at the least cost when it is needed.
2. Efficient Utilization of Financial Resources * It refers to economical use, in other words we see to it that financial resources are actually being used for what they have intended.
3. Effective Utilization
Financial Management Defined * It refers to that part of the management activity which is concerned with the planning and controlling of firms financial resources. * Financial management is concerned with raising financial resources and their effective utilization towards achieving organizational goals. It is the process of putting the available funds to the best advantage from the long term point of view of business objectives.
Purpose of Financial Management * Primary Objective * Maximization of return to the shareholder * Secondary Objectives * Customer Satisfaction * Reduce Misuse of Funds * Increase in Market Shares * Growth * Survival * Innovation
Scope of Financial Management
1. Estimating the Financial Requirement * The finance executives have to estimate the amount of fixed capital and working capital required in a given period of time.
2. Investment Decision * The funds raised from different resources are to be intelligently invested in various assets as to optimize their return of investment.
3. Management of cash flows * Cash is needed to pay off creditors, for purchase of materials, pay labor and to meet everyday expenses. There should not be shortage of cash at any time as it will damage credit-worthiness of the company.
4. Management of earnings * The finance executive has to decide about allocation of earnings among several competitive needs.
5. Choice of sources of finance * Finance executives have to evaluate and choose the best source.
Functions of Financial Management
1. Procurement of short term and long term funds from financial institutions. * Capital must be made available at the least cost when it is needed.
2. Efficient Utilization of Financial Resources * It refers to economical use, in other words we see to it that financial resources are actually being used for what they have intended.
3. Effective Utilization