Meaning and Objective of Financial Management
Category : business loan
Financial Management means planning, organizing, directing and controlling the financial activities similar to procurement and utilization of funds of the enterprise. It means making use of basic administration ideas to financial resources of the enterprise.
Scope/elements
- Investment decision involves funding in fixed assets (known as as capital budgeting). Investment in current assets are also part of funding decisions called as working capital selections.
- Financial Decision – They relate to the elevating of finance from more than a few resources so as to depend upon resolution on style of source, interval of financing, cost of financing and the returns thereby.
- Dividend Decision – The finance supervisor has to take resolution in relation to the web profit distribution. Net profits are traditionally divided into two:
- Dividend for shareholders- Dividend and the rate of it has to be decided.
- Retained earnings- Amount of retained earnings needs to be finalized that allows you to rely upon growth and diversification plans of the company.
Objectives of Financial management
The financial management is by and large concerned with procurement, allocation and control of financial resources of a concern. The objectives may also be-
- To make certain ordinary and ample supply of cash to the concern.
- To ensure sufficient returns to the shareholders that will rely on the incomes capacity, market cost of the proportion, expectations of the shareholders.
- To make sure most appropriate funds utilization. Once the money are procured, they must be utilized in highest possible way at least cost.
- To make sure safety on funding, i.e. money will have to be invested in safe ventures in order that adequate cost of return can also be performed.
- To devise a sound capital structure-There will have to be sound and reasonable composition of capital so that a stability is maintained between debt and equity capital.
