FINANCIAL MANAGEMENT

Tax Account Pro   /   Financial Management

 

Financial management is generally concerned with short term working capital management, focusing on current assets and current liabilities, and managing fluctuations in foreign currency and product cycles, often through hedging. (see Corporate finance. Financial risk management). The function also entails the efficient and effective day-to-day management of funds, and thus overlaps treasury management. It is also involved with long term strategic financial management, focused on me .a. capital structure management, including capital raising, capital budgeting.

Scope/Elements

1. Investment decisions include investment in fixed assets (called capital budgeting). Investment in current assets is also a part of investment decisions called working capital decisions.
2 .Financial decisions – They relate to the raising of finance from various resources which will depend upon decision on the type of source, the period of financing, cost of financing, and the returns thereby.
3. Dividend decision – The finance manager has to decide concerning the net profit distribution. Net profits are generally divided into two:

Objectives of Financial Management

1. To ensure a regular and adequate supply of funds to the concern.
2. To ensure adequate returns to the shareholders which will depend upon the earning capacity, the market price of the share, expectations of the shareholders.
3. To ensure optimum funds utilization. Once the funds are procured, they should be utilized in the maximum possible way at least cost.
4. To ensure safety on investment, i.e, funds should be invested in safe ventures so that an adequate rate of return can be achieved.
5. To plan a sound capital structure-There should be a sound and fair composition of capital so that a balance is maintained between debt and equity capital.