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.
 |
| Image courtesy by http:// |
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
0 comments: