Financial Management – Meaning, Objectives and Functions

heart of Financial Management Financial Management message planning, organizing, directing and imperative the pecuniary activities such as procurement and utilization of property of the enterprise. It means applying general management principles to financial resources of the enterprise. Scope/Elements Investment determinations includes investment in fixed assets (called as roof budgeting). Investment in current assets be also a part of investment decisions called as working capital decisions.Financial decisions They relate to the raising of pay from various resources which will play upon decision on type of source, expi balancen of financing, cost of financing and the returns thereby. Dividend decision The finance manager has to take decision with regards to the net profit distribution. Net earnings are generally divided into two Dividend for shareholders- Dividend and the rate of it has to be decided. bear profits- Amount of retained profits has to be finalized which will look upon magnification and diversification plans of the enterprise.Objectives of Financial Management The financial management is generally pertain with procurement, allocation and control of financial resources of a concern. The objectives butt end be- To ensure unshakable and adequate supply of coin to the concern. To ensure adequate returns to the shareholders which will depend upon the earning capacity, market price of the share, expectations of the shareholders. To ensure optimum funds utilization. Once the funds are procured, they should be engaged in maximum possible bureau at least cost. To ensure safety on investment, i. , funds should be invested in safe ventures so that adequate rate of return can be achieved. To plan a strait capital structure-There should be sound and fair base of capital so that a balance is hold between debt and equity capital. Functions of Financial Management Estimation of capital requirements A finance manager has to make estimat ion with regards to capital requirements of the company. This will depend upon expected costs and profits and future programmes and policies of a concern. Estimations have to be made in an adequate manner which increases earning capacity of enterprise.Determination of capital composition Once the estimation have been made, the capital structure have to be decided. This involves short- term and long- term debt equity analysis. This will depend upon the proportion of equity capital a company is possessing and additional funds which have to be raised from outside parties. Choice of sources of funds For additional funds to be procured, a company has many choices like- Issue of shares and debentures Loans to be taken from banks and financial institutions Public deposits to be drawn like in form of bonds.Choice of operator will depend on relative merits and demerits of each source and period of financing. Investment of funds The finance manager has to decide to allocate funds into profit able ventures so that there is safety on investment and unceasing returns is possible. Disposal of surplus The net profits decision have to be made by the finance manager. This can be done in two ways Dividend declaration It includes identifying the rate of dividends and other benefits like bonus. retain profits The volume has to be decided which will depend upon expansional, innovational, diversification plans of the company.Management of cash Finance manager has to make decisions with regards to cash management. Cash is involve for many purposes like payment of wages and salaries, payment of electricity and peeing bills, payment to creditors, meeting current liabilities, maintainance of enough stock, purchase of raw materials, etc. Financial controls The finance manager has not only to plan, procure and utilize the funds but he also has to exercise control oer finances. This can be done through many techniques like ratio analysis, financial forecasting, cost and profit cont rol, etc