Introduction to financial management

Financial management is concerned with the acquisition, financing and management in the business. Financial management is related to like accounting, economics, financing, mathematics, tax operation etc.

It is the specialized activity planning, organizing, directing and controlling with the top level financial management. It includes about money decision the capital structure, capital budgeting with short term and long term allocation.

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Definition

“Financial management, also referred to as corporate finance as managerial, is broadly concerned with the acquisition and use of funds by a business firm.”--- Prof. Prasanna Chandra

“Managerial management is concerned with the duties of the financial manager in the business firm.”--- Lawrence.J.Gitman

“Financial management is the operational activity of a business that is responsible for obtaining an effectively utilizing the funds necessary for efficient operations.”---Joseph Massie

Significance of financial management

The importance of financial management is wide are large. Every business affected financial activities with the money decision. Therefore, the significance of financial management is given below:

• Financial planning
• Successful business
• Smooth running of enterprise
• Facing unexpected risk
• Coordination of functional  functions
• Global competitiveness
• Business credit rating
• Paying regular dividends
• Protection of investment
• Improve profitability
• Help of decision making
• Promotion to save financial solvency
• Determination of business success
• Increase the value of the firm
• Measure the value of the firm

Function of financial management

Functions of finance are not goals the firm, but these achieve the ultimate goal of the firms. The following are the functional of financial management is below:

• Co-operation
• Organizing financial staff
• Relationship with stakeholders
• Protecting with shareholder’s interest
• Opportunity identification
• Management of cash
• Risk management
• Analysis of capital management
• Transact routing functions
• Ensure optimums liquidity
• Investment decision
• Need assessment of funds
• Capital structure decision
• Earnings retention and distribution
• Financial control

Features of financial management

Financial management is common in all types of business concerned with where to invest, how to invest, and how the investment should be managed. Especially with stock companies in need of financial management considerably both in the corporate sector. In the following section to focus on these unique features of financial management with the common features:

• Financial planning
• Forecasting flow of funds
• Investment decision making
• Protection of investment identification of sources of funds
• Procedural analysis of investment decision
• Retention and distribution of profit
• Debt-equity ratio analysis
• Risk-return trade- off
• Agency problem
• Controlled by professional managers
• Establishing financial relation and its protection

Principle of financial management

Financial management is the maximization of the wealth of the shareholder. This goal activity of financial management is to be operated under a set of principle. These can be called as the principle of finance the important role in decisions making made by financial management. So here we about the principle of financial management as follow:

• Optimum capital structure
• Annual budget plans
• The risk returns trade off
• Time value of money
• Liquidity and profitability
• Incremental cash flows
• Performance measurement
• Efficient capital market
• Competitive market
• The agency problem
• Principle of opportunity cost
• Principle of net present value
• Principle of coordination
• Taxes bias business decision
• Appropriate dividend policy

Goal of financial management of a firm

• Value of the firm and value per share
• Raising capital
• Investment of capital
• Protection of capital
• Maximization of wealth
• Maximization of profits
• Maintain steady earnings growth
• Avoid financial distress and bankruptcy

Social responsibility of financial management

The newest financial management strategies have run its operation the society while doing business. Every company has different social responsibility objectives through the main motive is the equivalent. The increased awareness of people social responsibility of the companies increased a lot. The corporate financial management is very existence depends on its being society's responsibility. The following are the social responsibilities of the financial management are as follows:

• Protecting investor interest
• Protecting consumers right
• Protecting creditors right
• Safe working conditions
• Ensuring pollutions free environment
• Maintaining fair hiring practices
• Ensuring a corruption free work environment
• Supporting education
• Proper use of resources

What is meant by management organization

According to Terry and Franklin, “Organizing is the establishing of effective behavior relationships among persons so that they may work together efficiently and gain personal satisfaction in doing selected tasks under given environmental conditions for the purpose of achieving some goal or objective”

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According to R. W. Griffin, “Organizing is deciding how best to group, organizational activities and resources.”

According to Prof. Which and Koontz, “Organizing is (1) the identification and classification of required activities, (2) the grouping of activities necessary to attain the objective, (3) the assignment of each grouping to a manager with the authority necessary to supervise it and (4) the provision for co-ordination horizontally and vertically in the organization structure.”

Importance of management organization

The management organization process is organizing, planning, leading, directing and controlling entity with the achieving organizational goals. The organization management activities, internal and external decision make to be able effective and beneficial. The following are the importance of management organization.

• To help with administrative activities
• Aid to accomplishment of objective
• Effective utilization of resources
• To help with division of labor
• Uses of modern technology and strategy
• Development of co- operation
• Smooth co- ordination
• Establishing leadership
• An aid to control
• Development of creativity
• Achieving flexibility

Principle of management organization

The principle means the organizational function of implementation of guidance for action. Management principles apply needs to profit and non-profit concerned with the organization. The following are the principle of management organization.

• Principle of goals
• Principle of efficiency
• Principle of division of labor
• Principle of balance between responsibility and authority
• Principle of determining the optimum span of supervisor
• Principle of scalar- chain
• Principle of defining specific responsibility
• Principle of conformity between authority and responsibility
• Principle of balance
• Principle of flexibility
• Principle of specialization
• Principle of order and discipline
• Principle of leadership