Financial Management:
Definition
Financial management is useful as a tool for allotment of resources to various projects depending on their importance and repayment capacity.Financial management includes adoption of general management principles for financial implementation. The following may be said as the related aspects of financial management raising of funds, using of these funds profitably, planning of future activities, controlling of present implementations and future developments with the help of financial accounting, cost accounting, budgeting and statistics.
Preparing and implementation of some plans can be said as financial management. In other words, collection of funds and their effective utilisation for efficient running of and organization is called financial management. Financial management has influence on all activities of an organisation.
Scope and functions of financial management
Liquidity can be ascertained through the three important considerations.
i) Forecasting of cash flow:
Cash inflows and outflows should be equalized for the purpose of liquidity.
ii) Rising of funds:
Finance manager should try to identify the requirements and increase of funds.
iii) Managing the flow of internal funds:
Liquidity at higher degree can be maintained by keeping accounts in many banks. Then there will be no need to depend on external loans.
1) Cost of control:
For the purpose of controlling costs, various activities of the firm should be analyzed through proper cost accounting system,
ii) Pricing:
Pricing policy has great importance in deciding sales level in company’s marketing. Pricing policy should be evolved in such a way that the image of the firm should not be affected.
iii) Forecasting of future profits:
Often estimated profits should be ascertained and assessed to strengthen the firm and to ascertain the profit levels.
iv) Measuring the cost of capital:
Each fund source has different cost of capital. As the profit of the firm is directly related to cost of capital, each cost of capital should be measured.
A business may fail without financial failures. Financial failures also lead to business failure. Because of this peculiar condition the responsibility of financial management increased. It can be divided into the management of long run funds and short run funds.
Long run management of funds relates to the development and extensive plans. Short run management of funds relates to the total business cycle activities. It is also the responsibility of financial management to coordinate different activities in the business. Thus, for the success of any firm or organization financial management is said to be a must.
Definition
Financial management is useful as a tool for allotment of resources to various projects depending on their importance and repayment capacity.Financial management includes adoption of general management principles for financial implementation. The following may be said as the related aspects of financial management raising of funds, using of these funds profitably, planning of future activities, controlling of present implementations and future developments with the help of financial accounting, cost accounting, budgeting and statistics.
Preparing and implementation of some plans can be said as financial management. In other words, collection of funds and their effective utilisation for efficient running of and organization is called financial management. Financial management has influence on all activities of an organisation.
Scope and functions of financial management
1. Liquidity:
Liquidity can be ascertained through the three important considerations.
i) Forecasting of cash flow:
Cash inflows and outflows should be equalized for the purpose of liquidity.
ii) Rising of funds:
Finance manager should try to identify the requirements and increase of funds.
iii) Managing the flow of internal funds:
Liquidity at higher degree can be maintained by keeping accounts in many banks. Then there will be no need to depend on external loans.
2. Profitability:
While ascertaining the profitability the following aspects should be taken into consideration:1) Cost of control:
For the purpose of controlling costs, various activities of the firm should be analyzed through proper cost accounting system,
ii) Pricing:
Pricing policy has great importance in deciding sales level in company’s marketing. Pricing policy should be evolved in such a way that the image of the firm should not be affected.
iii) Forecasting of future profits:
Often estimated profits should be ascertained and assessed to strengthen the firm and to ascertain the profit levels.
iv) Measuring the cost of capital:
Each fund source has different cost of capital. As the profit of the firm is directly related to cost of capital, each cost of capital should be measured.
3. Management:
It is the duty of the financial manager to keep the sources of the assets in maintaining the business. Asset management plays an important role in financial management. Besides, the financial manager should see that the required sources are available for smooth running of the firm without any interruptions.A business may fail without financial failures. Financial failures also lead to business failure. Because of this peculiar condition the responsibility of financial management increased. It can be divided into the management of long run funds and short run funds.
Long run management of funds relates to the development and extensive plans. Short run management of funds relates to the total business cycle activities. It is also the responsibility of financial management to coordinate different activities in the business. Thus, for the success of any firm or organization financial management is said to be a must.
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