WHAT IS FINANCIAL MANAGEMENT?

In this article you are going to learn financial management, topic i have discussed are what is financial management objectives of financial management what does a financial management do or functions of financial management and types of financial management. let’s read this article.

YPES, FUNCTIONS, OBJECTIVES

Financial management refers to the diplomatic planning organizing directing and supervising of financial undertakings in an organization it also comprises applying management principles to the financial resources of an organization while also playing significant part in economic budgetary management. There are many options that everyone can use for managing their finances this could manage them on your own hire a full-time employee hire a part time accountant or a third party who deals with all finance associated activities for you.

For example a chartered accountant usually organizations have an assigned department that looks after the financial involves of the company, a finance manager is appointed to control finance and manage its resources within an industry. They took all decisions related to finance at this position objectives of financial management.

For example a chartered accountant usually organizations have an assigned department that looks after the financial involves of the company, a finance manager is appointed to control finance and manage its resources within an industry. They took all decisions related to finance at this position objectives of financial management

1: To maximize profits by giving insights on for example ascending costs of raw materials that might trigger a hike in the selling value.

2: To secure adequate returns to the shareholders which will depend upon the earning capability the market value of the share expectations of the shareholders etc.

3: To track liquidity and cash flow to ensure the organization has enough money on hand to meet its requirements.

4: To ensure optimum funds utilization once the funds are procured they should be utilized in the maximum possible way at the least cost.

5: To provide safety on investment means funds should be invested in safe ventures so that they can obtain an acceptable rate of return.

6: To plan a sound capital structure there should be a sound composition of capital so that a balance is maintained between debt and equity capital.

What does a financial management do or functions of financial management?. the financial department of any organization has to handle numerous functions such as calculating the required capital. The financial manager has to calculate and estimate the amount of funds an organization requires this depends upon the policies of the firm regarding required expenses and profits.

The amount expected has to be determined in such a way that the earning capability of the organization increases. determining capital structure once the need for capital funds has been decided a decision regarding the type and proportion of various sources of funds has to be taken, for this the financial manager has to figure out the proper mix of capital and debt and short term and long term capital ratio.

This is done to obtain the minimum cost of capital and minimize shareholders wealth. choice of sources of fund before the exact acquisition of funds the finance manager has to check the sources from where the funds are to be collected, the management can raise finance from different sources like equity investors preference shareholders debenture holders banks and other financial associations public deposits.

Investing the capital every organization or business requires investing money to raise more capital and earn regular returns, hence the financial manager needs to invest the organization funds in secure and effective ventures. Procurement of funds the financial manager has to procure funds required for the organization, it might involve consultation with creditors and financial associations issue of prospectus etc.
the procurement of funds is reliant not only on the cost of raising funds but also on other aspects like the general market situations decisions of investors government policy etc.

Allocation of profits once the organization has received a decent amount of net profit is the financial managers duty to allocate it efficiently this could require keeping a part of the net profit for an emergency innovation or expansion purpose while another pqrt of the profit can provide rewards to the shareholders.

Financial control not only does the financial managers have to plan organize and get funds but he also has to manage and evaluate the firms finance in the short term and the long term this can be done using some financial tools such as financial forecasting ratio evaluation risk control and profit and cost control now come to the types of financial management, in financial management’s studies there are mainly three types of financial management.

1: capital budgeting, it relates to determining what needs to happen financially fo the campany to reach its short term and long term objectives, where should capital funds be spent support growth, these management terms are likewise answerable for raising funds and investing funds.

2: Capital structure, figuring out how to pay for operations and growth if interest rates are responsible taking on debt might be the best response a company might also seek funding from a private investment company consider selling assets like real estate or selling capital where applicable, the point when the team refers to capital structure they are apparently dealing with a company debt to equity ratio which gives an understanding of how strong an organization is financially or how risky the organization is financially.

3: Working capital management, working capital management of an organization deals with managing bookkeep methods and accounting policies intended to keep track of current assets current debts cash flow inventory turnover ratio working capital radio and much more. The basic task working capital management is to assure the organization dependably keeps up adequate liquid cash to meet its short term debts operational cost.

This is one type of financial management where the team needs to maintain working capital management to smoother the company’s operational cycle and also increase the company’s earnings.