Question

Explain in detail financial management?

Answer 1

Normally every business firm has to raise funds from various sources for investing of those funds in various investment opportunities. In order to ensure the most successful utilization of funds and to provide a good return from the investment, better financial policies have to be developed. Sufficient and economical financing will give the firm a differential advantage in the market. The success of a business is depends how its capital funds are raised and utilized. In today’s economy, the importance of finance has significantly increased due to the Scale of operations, capital intensive techniques of production and distribution. Financial Management involves various stages such as, planning, organizing, staffing, directing and controlling of financial activities

             Finance is the blood of every business. Most of the resources are limited but, our wants are unlimited. That is why finance is so much important as far as a business is concerned. Financial Management involves the application of general management principles to the financial areas of an enterprise. Timely management of finance in an organization helps to the efficient functioning of every organization. Money or finance will help the wheels of business to run efficiently.

                    Financial management helps to reduce the cost of finance, Ensures easy availability of funds and is dealing with the planning, organizing, and controlling of financial activities. Financial management includes various decisions such as Investment decisions, financial decisions, Dividend decision, etc. Investment decisions include decisions regarding the investment in fixed assets and current assets. Financial decisions involve raising of finance from various sources considering the type of source, period of financing, cost of financing. Dividend decision involve decision regarding the distribution of net profit.

                         Financial management should be consistent with the overall objectives of the business. The overall objective of financial management is to make maximum from investment in the long- term. This concept is called wealth maximization. Wealth maximization involves maximizing the market value of the investment of the company.

        Wealth of shareholders = Number of shares held ×Market price per share.