Question

• Discuss the role of finance in business. What is the purpose of financial management?
• Describe the kinds of activities that financial management involves.
• What kind of tools do financial managers leverage to access and/or monitor the health and performance of a business? Have you used any of these tools? If so, share your experience.

Answer 1

Finance is termed as the blood of the business and it is used regularly in order to operate the business so business cannot run without the finance and purpose of Financial Management is effective management of the financial resources so that company can have a competitive edge and it can also increase the value by better utilisation of the financial resources because ultimately the aim of the company is to maximize the shareholders wealth which is most financial in nature.

financial management will be involving activities like financing activities along with investing activities along with dividend activities.

Financial managers will be trying to analyse the performance of the company by determination of the financial ratios which is most comprehensively used tool in order to determine the performance of the company and ascertain it with performance of other company and hence they will try to use various kinds of profitability ratio along with Asset Management ratio along with solvency ratios in order to find out the the strength and weakness of the firm.

I have used solvency ratios and liquidity ratios of the company before investing into the company and then finding out whether the company can sustain for longer period of time and the company is having a Liquidity in order to discharge the debt or not