Financial Management
Financial management is a process which involves planning, organizing, controlling and directing of financial activities such as the procurement, development and maximum utilization of the funds in an organization. Finance is the lifeblood of every business and it is the study of how the investors allocate the assets in the competitive business environment. In simply we can say that, financial management is the process of applying general management principles to the resources available in the business enterprises.
Functions of Financial management
Financial Management is the base for the success of every business organizations and which includes all the managerial activities related to the finance and other resources of the business. The main objective of the financial management is concerned with the procurement, allocation and control of financial resources in an organization. Some of the important functions of financial management are as follows:-
- Estimation of Capital requirements.
The estimation of capital requirements for the business is the main responsibility of a financial manager. Capital is the indication of the structure and future plans of the business. The capital requirements should be depends on the nature and characteristics of the business. If the business is a short term plan then it will have a small capital requirements or the type of the business also will depend the capital requirements of the company.
2. Determine the capital composition
Determination of the capital composition involves the process of deciding the short term and long term capital structure of the business along with the debt equity analysis. This process will depends on the proportion of the companies equity capital as well as the additional funds in which the company have to be raised from the outsiders. The estimation is the base for fixing of capital structure for the business.
3. Sources of Funds
Another important function of a financial manager is to analyze the external environment and find out the favorable choices for procuring funds for the future process of business activities. Some of the main choices of source of funds are as follows:-
Another important function of a financial manager is to analyze the external environment and find out the favorable choices for procuring funds for the future process of business activities. Some of the main choices of source of funds are as follows:-
a) Issue of shares and Debentures.
b) Loans from banks and other financial institutions.
c) Fund from Bonds.
4. Investment of Funds
Investment of funds is the very important function in any business organization. This is the main responsibility of the finance manager to analyze and study various profitable ventures to invest the funds and it will help to get maximum return from the investment.
5. Disposal of surplus
The finance manager is the responsible person to take adequate decisions regarding net profit of the company. It will be done in two ways, that is Dividend Declaration and Retained profits.
6. Management of Cash.
The key function of a finance manager is cash management and this depends on the future functions in an organization. Cash is required for many purposes in every business organization which includes payment of wages and salaries, purchases, Payment of bills, Meeting current liabilities etc.
7. Financial Controls
The financial control is one of the major function of the finance manager along with the procurement and utilization of finance. The financial control is done through the clear forecasting of future conditions, Ratio analysis techniques, forecasting of cost and profit of the business etc.
These all are the major functions of financial management as well as the financial manager.
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