Definition of Financial Management its Objectives

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Definition of Financial Management its Objectives

Definition of
Financial Management its Objectives

For understanding financial management, we need to understand finance so before going to our main topic of financial management, we need to understand the functions of finance. Are including the decisions of the investments, decisions of getting loans, decisions of paying loans, decisions of paying the dividends, and the decisions of selling the assets of the organizations. Now let us move towards the main topic of the discussion.

Financial Management

Financial Management can be simply defined as its planning, organizing, directing, and controlling the actives which are about Finance. For Example, managing the procurement of the organization is also part of financial management. Utilizing funds, budgeting, borrowings, etc. all activities are known the financial management. The function of financial planning is also the part or function of financial management.

Scope or Elements of the Financial Management

Decide that where to invest is also part of financial management. The investment of fixed assets which is also known as capital budgeting and the investment of current assets which is also known as the working capital decisions. The decisions of borrowings or using own funds which are also known as the financial decisions are part of Financial Management. The dividends of shareholders are also part of financial management.

Objectives of Financial Management

The main objectives of financial management are describing as follows: -The main objective of financial management is to manage the availability of required funds throughout the financial year. Earning good profit through good financial decisions and providing a good return to the shareholders is also part of financial management. The proper utilization of the funds in a way to earn a good return is also included in financial management. The most important objective of financial management is to arrange the best level of capital structure which gives the best returns to the shareholders of the organization. This is the most complicated and technical job for the financial managers of the organizations. This technique requires a good educational background and rich experience in the related field of expertise.

 Main Functions of Financial Management

A good financial manager requires to make the most realistic estimation or protection of the requirement of the funds throughout the financial year. To determine the capital composition of the organization, that how many portions of total debt will be consist of the short-term debt and how many portions will be of long-term debt. This decision of composition will be consisting of requirement needs and most economical in cost of the debt. In addition to this decision, it is also required to decide that from which institute they are going to borrow the short-term loans and long-term loans. Another main function of financial management is to make the proper investment decisions, these decisions are also included the long-term and short-term investment according to the situation and return of the investments. Financial managers are required to keep in mind the cost of investment and the benefit of the investment.  Financial control is also the function of financial management. The financial managers are required to create strong internal controls which ensure that the funds should not be misused by the employees of the organization for their interests instead of the interest of the organization.

We referred to the MSG website so Special thanks to Management Study Guide and the author “Prachi Juneja”.

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