Question

Explain the significance of finance in a business organization and the implications of agency relationships in financial management.

Answer 1

Finance is considered as the the blood of the business so it is an inherent part of business and it needs to be controlled with high precision.

finance is used at various decision making processes and various capital budgeting processes. it is used to determine the growth and the expansion of the company..

it is also needed to determine the capital structure and the money flow as well as the cash flows in the company so it helps in controlling the liquidity in the company.

Finance is also important in in various kind of cost cutting and cost savings so that profit can be maximized to the maximum possible extent in order to help the organisation in the long run.

Implications of agency relationships in financial management is highly important as shareholders are considered as the principals and the management is always considered as their agents, so management needs to act on the shareholders behalf and shareholders interest, so that the mutual goal of benefiting the organisation can be achieved and there must be a coordination and cooperation between both sides of an agency in order to gain maximum out of it in the long run.