Question

What are the 10 principles of financial management and their definitions?

Answer 1

FINANCIAL MANAGEMENT:

Money required for carrying business activities is called business finance. Finance is needed to establish a business, to run it, to modernize it, to expand or diversify it.

Financial Management is the activity concerned with the planning, raising, controlling and administering of fund used in the business.It is concerned with optimal procurement as well as usage of finance. It aims at ensuring availability of enough funds whenever required as well as avoiding idle finance.Having an organised financial process can increase the chance of company of being successful in an industry. However, a business should consider these principles in managing their finances.

PRINCIPLES OF FINANCIAL MANAGEMENT

1) ORGANIZING FINANCE:

Organizing finances is the first step to creating wealth. Tracking each and every penny of the company is must, in order to excel in competitive world.

2) SPENDING LESS:

One have to learnt how to trace his finances and know where to spend the most.this will help to control money efficiently.

Morris says "The best way to ensure that you either overcome debt or avoid it in the first place is to never spend more than you make".

3) PUT YOUR MONEY TO WORK:

'LET YOUR MONEY WORK FOR YOU "- Take the advantage of the time value of money. Investing your saving as early often result huge return,even if the amount is small.Saving and right Investment will lead to highest success.

4) LIMITING DEBT TO INCOME PRODUCING ASSETS:

The essential principle of financial management is to limit debt to income-producing assets. Credit cards and loans are also money flushed down the drain. Don’t apply for a car loan or credit if you don’t need it. And if you plan to apply for it, you should reconsider making money out of it for a return on investment

5) BE UPDATED:

Reading every financial related articles,books and blogs will required to make profit out of situation and seeks more opportunity into the business world. Continuously educating oneself is great in order to not miss excellent investment opportunities.

6) UNDERSTANDING RISK:

As we have heard of this line, No Risk No Reward, so Chance and Risk are at the heart of business success and profit margins. The key to understand Return on investment is to take risk with proper understanding and calculation.

7) DIVERSIFYING INCOME:

Find creative ways to diversify income.Everyone has a talent or special skill,"turn your talents into a money-making opportunity". Extra income can supplement your full-time income.

8) MAXIMIZING EMPLOYMENT BENEFITS:

Make sure you are taking advantage of all the ways benefits can save you money by reducing taxes or out- of pocket expenses. Financial Planning to avail all exemption and deductions is great move to save your precious money.

9) TAX PLANNING:

Tax Planning helps you to save your income, complete,updated information of taxes amendments can save money,and put for other beneficial proposals. understanding all the Tax implication for every investment.

10) PREPARED FOR UNCERTAINTY:

in spite of your best efforts, you will face unforeseen emergencies,something which is unexpected. Provision may be made for losses either through insurance or contingency fund.

SAVING MONEY INVESTING IN RIGHT PLACE,AT RIGHT TIME WILL ENSURE THE SURVIVAL AND GROWTH OF BUSINESS AND ABOVE PRINCIPLES ARE TO BE TAKEN INTO CONSIDERATION TO ACHIEVE MAIN GOAL OF THE ORGANIZATION.

to know risk is to know profit