Financial Management – Meaning, Objectives and Functions
Meaning of Financial Management
Financial Management means planning, organizing, directing and controlling the financial sports together with procurement and usage of price range of the corporation. It means making use of widespread management concepts to financial resources of the employer.
Investment selections includes investment in constant belongings (known as as capital budgeting). Investment in cutting-edge property also are part of funding choices known as as running capital selections.
Financial selections – They relate to the elevating of finance from various assets so as to depend upon selection on form of supply, period of financing, value of financing and the returns thereby.
Dividend decision – The finance supervisor has to take selection as regards to the net income distribution. Net profits are commonly divided into :
Dividend for shareholders- Dividend and the price of it must be determined.
Retained earnings- Amount of retained profits must be finalized in order to depend upon expansion and diversification plans of the enterprise.
Objectives of Financial Management
The monetary management is commonly worried with procurement, allocation and manage of financial assets of a situation. The objectives can be-
To make sure ordinary and ok supply of finances to the priority.
To ensure good enough returns to the shareholders that allows you to rely upon the incomes capacity, market price of the share, expectations of the shareholders.
To make sure premier budget usage. Once the funds are procured, they have to be utilized in most feasible way at least price.
To make sure protection on funding, i.e, finances need to be invested in safe ventures so that adequate fee of go back can be performed.
To plan a valid capital structure-There have to be sound and fair composition of capital in order that a stability is maintained between debt and fairness capital.
Functions of Financial Management
Estimation of capital requirements: A finance manager has to make estimation with reference to capital requirements of the business enterprise. This will rely on expected costs and profits and future programmes and policies of a subject. Estimations have to be made in an adequate manner which increases earning capacity of organisation.
Determination of capital composition: Once the estimation were made, the capital structure have to be determined. This entails brief- time period and lengthy- term debt equity analysis. This will rely upon the percentage of fairness capital a business enterprise is possessing and further funds which have to be raised from outdoor events.
Choice of assets of funds: For extra budget to be procured, a organization has many picks like-
Issue of stocks and debentures
Loans to be taken from banks and economic establishments
Public deposits to be drawn like in shape of bonds.
Choice of aspect will rely upon relative merits and demerits of each source and length of financing.
Investment of finances: The finance manager has to decide to allocate budget into worthwhile ventures in order that there may be protection on investment and regular returns is possible.
Disposal of surplus: The internet earnings choice should be made by means of the finance supervisor. This can be achieved in methods:
Dividend assertion – It consists of identifying the rate of dividends and other advantages like bonus.
Retained income – The extent must be decided that allows you to depend on expansional, innovational, diversification plans of the employer.
Management of coins: Finance supervisor has to make decisions with reference to coins control. Cash is needed for many purposes like price of wages and salaries, price of strength and water payments, price to lenders, assembly current liabilities, maintainance of enough inventory, purchase of raw materials, and many others.
Financial controls: The finance manager has no longer only to devise, procure and utilize the budget however he also has to workout control over price range. This may be finished through many strategies like ratio analysis, economic forecasting, cost and earnings manipulate, etc.
Authorship/Referencing – About the Author(s)
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