Financial Management refers to the better utilization of finance. It is concerned with the procurement of funds and investment of funds in short-term and long-term assets.
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Meaning of Financial Management:
It defines the Planning, organizing, directing, and controlling the flow of funds and their efficient utilization for meeting the goals of the organization. Secondly, we can say that it includes investment, use, and distribution of funds for the smooth working of the organization.
A financial manager takes decisions regarding financial matters. Such as analysis of inflow and outflow of funds, sale, and purchase of assets, all expenses, and incomes. The finance is managed through Capital Budget Management, Capital Structure Management, Working Capital Managemen.
Financial management ensures the:
1.To reduce the cost of finance
2. Sufficient availability of funds
3. To use the finance for the expansion and development of the business/organization.
4. Shareholders of the organization to get fair returns on their investment.
“Financial management is the activity concerned with planning, raising, controlling and administering of funds used in the business.”
– Guthman and Dougal
“Financial management is that area of business management devoted to a judicious use of capital and a careful selection of the source of capital in order to enable a spending unit to move in the direction of reaching the goals.”
– J.F. Brandley
Objectives of Financial Management:
Firstly, maximizing the wealth of equity shareholders(owners) is the main objective of financial management let’s discuss the points related to objectives :
1. To ensure a regular and accurate supply of funds.
2. To ensure appropriate returns to the shareholders which will depend upon the market price of the share, earning capacity.
3. To ensure better utilization of funds. Once the funds are acquired then they should be used in a possible way at least cost.
4. To ensure safety on investment.
5. To plan a sound capital structure: There should be a fair arrangement of capital so that a balance is maintained between debt and equity capital.
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