Financial Management is a lifeline and vital activity in any organization or business. It is the process of Organizing, Planning, controlling and monitoring financial resources or financial activities such as procurement and utilization of funds of the enterprise and the Financial management focuses on ratio, equalities and debts. The meaning of applying general management principles to financial resources of the enterprise. Financial Management generates the effective and efficient management of funds in such a manner as to accomplish the objectives of the organization. Financial Management is mainly connected with the management of funds.
The Application of General Principles of management to the possession of financial enterprise. Proper management of an organization that provides financial quality fuel and ensures efficient functioning for regular service. The growth and development of finances are not properly dealt with and an organization will face barriers that may have severe repercussions on its. It is important for any business that the finance it invests procures in a manner that the cost of finance is cheaper than the investment.
- The cost of Finance reduced the Endeavors.
- The availability of funds are sufficient for ensures.
- The procurement and utilization of funds that the Deals with the planning, organizing and controlling of financial activities like the procurement and utilization of funds.
Scope Of Financial Management
Requirements of Funds Estimate
The Business funds need to be both short run and long run, so, they can help to improve the efficiency of funding and the estimation depends on the budget and that is the sales budget and production budget.
Capital Structure Determining
The Capital structure is using different sources of funds for firm finances to overall growth and operations. The financial manager should decide the mix of debt and equity and also types of debt when the requirement of funds has been estimated.
A business gives huge returns when your investment is good.
It depends upon decision on type of source, period of financing, cost of financing and the returns which will relate to the raising of finance from various resources.
The net profit distribution regards to finance manager has to take decision and the profits are generally divided into two:
- Dividend for shareholders- The rate of it has to be decided and Dividend
- Profits retained- It depends upon expansion and diversification plans of the enterprise which will be Amount of retained profits has to be finalized.
Objectives Of Financial Management
The financial management is generally concerned with allocation and control, procurement of financial resources of a concern. The objectives can be:-
- The concern to ensure regular and adequate supply and ensure regular of funds
- The earning capacity, market price of the share, expectations of the shareholder and it depends upon adequate returns to the shareholders.
- The funds are procured, they should be used in the maximum possible way at least cost to ensure optimum funds utilization.
- The funds should be invested in safe ventures so that adequate rate of return can be achieved and it depends on ensuring safety on investment.
Functions Of Financial Management
Capital Requirement Estimation
The company capital requirements with regards to the finance manager has to make an estimation. The expected costs and profits and future programmers and policies of a concern, it will totally depend on them. Increases earning capacity of enterprise which estimations have to be made in an adequate manner.
Determination Of Capital Composition
The capital structure has to be decided when the estimation have been made, It involves the debt equity analysis for short- term and long- term. This will depend upon the proportion of equity capital a company is possessing and additional funds which have to be raised from outside parties.
Sources Of Funds Choice
There are some choices for a company to procured the funds and the details are here:-
- Issues of debentures and shares.
- Loans are taken from the financial institute and banks.
Investment Of Funds
There is safety on investment and regular returns are possible for the finance manager has to decide to allocate funds into profitable ventures.
Cash management regards the Finance manager having to make decisions. Cash is required for many purposes like payment of wages and salaries, payment of electricity and water bills, payment to creditors, meeting current liabilities, maintenance of enough stock, purchase of raw materials, etc.
The finance manager has to exercise control over finance but he has not also only the plan, procure and utilize the funds. The finance control can be done through many techniques that are ratio analysis, cost and profit controls, financial forecasting, and etc.
Importance Of Financial Management
Financial Management is important for various reason and some reasons are given below:-
- Helps organisations in financial planning.
- Assists organisations in the planning and acquisition of funds.
- Helps organisations in effectively utilising and allocating the funds received or acquired.
- Assists organisations in making critical financial decisions.
- Helps in improving the profitability of organisations.
- Increases the overall value of the firms or organisations.
- Provides economic stability.
- Employees to save money, which helps them in personal financial planning.
Why Study Financial management?
Diverse career Opportunity
Studying financial management gives lots of diverse career opportunities. It could be in the private or public sector. Some of the career options include entrepreneurship, investment banking, financial analysis, financial accounting, managerial accounting, and strategic financial management. It is also beneficial for those people who are interested in starting their own business.
Improve Interpersonal Skills
This course helps you to build better communication and teamwork skills through developing relationships with your colleagues.
This field also helps to improve your soft skills and people who wish to work in this sector must be extroverts, and should be able to talk about finance for hours altogether. It helps to improve their personality, knowledge, and communication.
Greater Jobs Prospects
A spike in demand for finance manager jobs in the US due to a growing range of financial products and the need for in-depth knowledge of geographic regions and it is further proven by the fact that the demand for careers in financial management has increased by 14%, careers in financial advising by 32%, and careers in financial analysis by 23%.
Higher Salary Package
This sector working people are usually paid very well, whether it is at the entry level or at the management level. This is a most highly skilled job role that is always in demand, even during recessions.
In this sector people always have an opportunity to develop your professional skills and climb the career ladder. You can quickly acquire the knowledge of financial management systems and financial management software once in this field. If you take the knowledge and great aptitude skills, this field is perfect for you.
What is the future Financial Management Study
The management course related to finance or gaining a finance degree offers excellent career opportunities. Some of these diverse career options related to this field are following:-
- Corporate manager
- Investment banker
- Financial adviser
- Financial analyst
- Financial examiners
- Financial managers
- Personal financial planners
- Budget analysts
- Investor relations associate or executive
- Credit analyst.
It is clear for the study of the effect of a company’s financial performance and goals that the mission and objectives oriented by company’s strategy but strategy must be driven by finance.
Financial Management is prepared for selected future dates, generally for middle term and long term plans of the firm. Budgets are used for one year, and are prepared only to fulfill the firm’s objectives envisaged in the particular year. It means, the finance represents the engine that helps and allows us to move forward and accomplish the company’s mission and their objectives. It also helps to clear the strategy must be made up of the steps that the company must take in order to be successful. The Finance ratios will provide cash inflow that is worth more than the cash outflow. Finally, we have know how to manage both resources and money according to priority set by the mission, objective, strategy, and others related to it.