Financial Management Goals
Financial management main operation is, to concentrate on the fund management magnitude relation of equity and debt.
It conjointly participate in portfolio management, distribution of dividends, capital raising, hedging and care of fluctuations in foreign currency and merchandise cycles. Financial managers do analysis for, efficient and effective management of wealth in this way to meet the organization's objectives. To maximize the firm's value along with the company's assets for all stakeholders. This is a specific task linked directly to top management. They make management strategy. to raise capital and how the capital is allocated, they also work on the capital budgeting, and shareholders' dividend policies.
According to Howard & Opton,
Financial management may be defined as that area or set of administrative function in an organization, which are related with arrangement of cash and credit, so that organization may have the means that to hold out its objective as satisfactorily as attainable.
Goals of Financial Management
The goals of economic management ought to be, to properly use of the funds to maximize short term profits and reduce risks. These goals mean that the finance manager ought to create a monetary call in such how in order that the high level of profit are often ensured. He should find out that causes, which should avoid unnecessary risks and anticipate the problem areas and methods of upcoming difficulties. In fact the worth of a firm is collectively tormented by returns and risks.
In the real world, the relationship between the returns and risks. is invertionaly proportional. Investors who promise high profits will be more risky than their counterparts. Therefore the most responsibility of the finance manager, is to form a prudent balance between come back and risk to maximise the firm's worth.
And to assure maximum benefit of the firm, a finance manager should monitor the cash flow and outflow of the business, and to ensure the effective use of resources. He should try to make sufficient flexibility in the financial operations of the enterprise, so that uncertainty can be minimize with Identifying strategic options in relation to the acquisition of investment outlets and funds. When finance manager managing money, he should be ensure that the firm has sufficient liquid resources to fulfill its obligations at all times, and also have a reserve for meeting emergencies.
Management Vs Owners
The management of Associate in Nursing enterprise is accountable, for the achievement of organization purpose.
Although they can not work like the owners and pursue their goals to meet their ambitions to end their control over the enterprise, but they pursue their personal goals especially due to the constant evaluation of managerial performance.
Those management work against firm's goal, mustn't be allowed to continue. Because in today's competitive world, a company can not tolerate inefficient management, which can be big financial burden for the company, and should do that tasks which are in line with the maximum objectives of the money. However, on some occasions management interest could impinge on the homeowners. Then management ought to play the role of satisfactorily instead of a max. The word glad here means that, the person ready to do something less. It are often seen that management could produce other goals, but the goal of maximizing the interests of the owners is the key goal, which is to move management forward.
Nature of Financial Management
Financial management isn't worker work, but it is an integral part of overall management. It is not only limited to fundraising activities, but also monitor the use of money and its uses. These functions affect the firm's other operations, such as production, marketing and personnel.
So that monetary management the guts of an organization, firm's overall existence is influenced by its financial operations.
In the investment call, a finance manager faces these basic problems, How to invest, in which special projects should be invest, In the financing decision the finance manager should tell nature of the loan, what form should the loan, equity shares, priority shares and other sources be sought. The finance manager decides how the firm's income should be allocated between dividends and retention. He will have to prepare such a dividend policy as sufficient, funds may be provided to meet the development needs of the firm as well as to ensure proper dividends to the stockholders. The finance manager particularly once choosing investment within the firm, Should take the advice of other functional officers. After consulting the assembly and promoting executives ought to take monetary call. As a matter of fact, taking a financial decision is a continuous dynamic process, that constantly affect with various environmental forces and adjusts its financial objectives and strategies accordingly. A micro finance manager is always able to change the internal and external environment. Keeps alive and aims at strategies, objectives, to seize potential opportunities and reduce imminent threats. Crossover brings necessary adjustments in policies and procedures.The financial planning has not been subjected to review from time to time and will be amended in view of changed circumstances, as the situation changes to such extent that this plan is not relevant. And acts as an obstacle.
Scope of Financial Management
Finance Management includes both public and private finance. Public Finance managed by the govt bodies, acquisition and administration of these funds done by the government. On the opposite hand privately or personal finance management, the complete management is within the hand of high management, and that they create all the monetary policies just for
the profit of the company.
Financial management can be divided into three categories:
1. Finances of sole trading organisations.
2. Finances of Partnership firms.
3. Finances of Corporate organisations.
3. Finances of Corporate organisations.
1. Finances of Sole Trading Organisations
The functions of monetary management, varies from enterprise to enterprise on the idea of characteristics of firm, size, nature, conference, etc. Thus, in tiny firms wherever the operation is comparatively straightforward and fewer sophisticated and there's alittle delegation of management functions, No separate govt is appointed for this. In fact, the owner who handles all these activities on his own. He prepares a cash budget for his firm to assess the needs and arranges finance to meet these needs. He himself sees the work of receipts and disbursements, extends debt, collects receivable accounts, manages cash accounts and arranges extra money.
In such considerations, the finance function is not properly defined And the finance function is combined with production and marketing functions. Financial planning is given an important place.
2. Finances of Partnership firms.
The proprietors rarely have given any training in such activities. The expertise of the fun function increases with the increase in the size of the organization's degree.
In medium-sized enterprises, financial activities are governed by the Senior Management Executive, who is designated as Treasurer, Finance Director, Finance Controller, Vice President in Finance.
They are typically attributable to the Department of Credit and assortment and Department of Accounts, Investment Department And the charge of the audit department is given. He is additionally chargeable for getting ready annual monetary reports. He reports directly to the chairman and the board of directors. Their voice depends on their ability to make decisions, and whether their firm is either or not, is organized closely. In the larger considerations, the Finance Manager is the top management executive who participates in various decision-making tasks. For example, involving the dividend policy, the acquisition of other firms, refinancing the loan, presenting a major new product, an old one Cun, to add a manager. Floating a plant or changing place, floating a bond or stock issue, entering and rearranging sales, strategic alliances, etc. In most cases, a finance manager directly places the chairman and board of administrators as vp reportage.
3. Finances of Corporate Organisations
The place of finance within the management hierarchy in an exceedingly giant enterprise has been portrayed in Figu
It seems that an outsized organization consists of a commission within which some members of the board and a finance manager area unit concerned. The committee makes recommendations for final approval of the Board. In bigger concerns, the controlling and treasurer are appointed to handle financial matters. The financial planner is responsible for financial planning and control, preparation of annual financial reports and fulfilling capital expenditure activities, whereas the treasurer's responsibility is limited to business objectives, management of assets and security investment and mobilization of resources for tax and insurance matters.