What Does Financial Management Have To With Borrowing Money

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Financial Management - Meaning, Objectives and Functions

Significant of Financial Management

Fiscal Management means planning, organizing, directing and decision-making the financial activities such as procurement and utilization of funds of the enterprise. It ways applying general management principles to financial resources of the enterprise.

Scope/Elements

1. Investment decisions includes investment in fixed avails (called every bit capital budgeting). Investment in electric current assets are also a part of investment decisions called as working capital decisions.
2. Fiscal decisions - They relate to the raising of finance from various resources which volition depend upon decision on type of source, period of financing, cost of financing and the returns thereby.
3. Dividend decision - The finance manager has to have determination with regards to the internet profit distribution. Net profits are more often than not divided into ii:
   1. Dividend for shareholders- Dividend and the charge per unit of it has to be decided.
   2. Retained profits- Amount of retained profits has to exist finalized which will depend upon expansion and diversification plans of the enterprise.

Objectives of Financial Management

The fiscal management is by and large concerned with procurement, allocation and command of financial resources of a business organization. The objectives tin can be-

1. To ensure regular and acceptable supply of funds to the concern.
2. To ensure acceptable returns to the shareholders which volition depend upon the earning chapters, market toll of the share, expectations of the shareholders.
3. To ensure optimum funds utilization. Once the funds are procured, they should be utilized in maximum possible way at to the lowest degree cost.
4. To ensure safety on investment, i.e, funds should exist invested in safe ventures so that acceptable rate of return can be achieved.
5. To plan a sound capital structure-In that location should be sound and fair composition of capital so that a balance is maintained between debt and disinterestedness upper-case letter.

Functions of Financial Direction

1. Estimation of capital requirements: A finance manager has to make estimation with regards to capital requirements of the company. This will depend upon expected costs and profits and future programmes and policies of a concern. Estimations take to be fabricated in an acceptable style which increases earning chapters of enterprise.
2. Determination of capital composition: One time the interpretation have been made, the majuscule construction have to be decided. This involves short- term and long- term debt equity analysis. This will depend upon the proportion of equity capital a visitor is possessing and additional funds which accept to be raised from exterior parties.
3. Choice of sources of funds: For boosted funds to exist procured, a company has many choices like-
   1. Issue of shares and debentures
   2. Loans to exist taken from banks and fiscal institutions
   3. Public deposits to be drawn similar in grade of bonds.

   Choice of factor volition depend on relative merits and demerits of each source and catamenia of financing.

4. Investment of funds: The finance manager has to make up one's mind to allocate funds into profitable ventures so that there is safety on investment and regular returns is possible.
5. Disposal of surplus: The net profits conclusion have to be made past the finance manager. This can be done in two ways:
   1. Dividend announcement - It includes identifying the rate of dividends and other benefits like bonus.
   2. Retained profits - The volume has to be decided which volition depend upon expansional, innovational, diversification plans of the company.
6. Direction of cash: Finance manager has to make decisions with regards to cash management. Cash is required for many purposes like payment of wages and salaries, payment of electricity and h2o bills, payment to creditors, coming together electric current liabilities, maintainance of enough stock, purchase of raw materials, etc.
7. Financial controls: The finance manager has not simply to program, procure and utilize the funds but he also has to exercise control over finances. This can be done through many techniques similar ratio analysis, fiscal forecasting, toll and profit control, etc.

Authorship/Referencing - Well-nigh the Author(south)

The article is Written By "Prachi Juneja" and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Fellow member, Professionals and Subject field Matter Experts. We are a ISO 2001:2015 Certified Instruction Provider. To Know more, click on About Us. The use of this material is complimentary for learning and educational activity purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.

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