In this article we will discuss about Concept of Financial Management: Meaning, Scope, Objectives and their Functions.
Financial management is the one of the most important function in an organization. It contains Planning, Organizing, Directing and controlling the financial activities in business organization. It helps organization to procure finance from different sources and utilization of fund.
In business organization finance is the one of the most important function which is interrelated with Personal, Market, Production and selling function and other developing activities of business.
According to Dr. S.N.Maheswari, “Financial management is concerned with raising financial resources and their effective utilization towards achieving the organizational goals”
According to Richard A. Brealey,” “Financial management is the process of putting the available funds to the best advantage from the long term point of view of business objectives”
Scope of Financial Management
Financial management has a wide scope. According to Dr. S. C. Saxena, the scope of financial management includes the following five ‘A’s.
- Anticipation: Anticipation involves estimation of finance for organization, so it helps to find company requirements.
- Acquisition: It involves collection of finance from different source for organization.
- Allocation: It uses this collected finance to purchase fixed and current assets for the company.
- Appropriation: It divides the company’s profits among the shareholders, debenture holders, etc. It keeps a part of the profits as reserves.
- Assessment: It includes to controls all the financial activities of the company.
Objectives of Financial Management
- The first and the foremost objective of the financial management is to maximization of profit from different activities.
- To Optimum utilization of resource in organization to achievement of its goal.
- To proper utilization of finance is an important objective of financial management. The finance manager must plan the optimum use of finance. They must use the finance profitably delivering best value for money. They must not waste the money of the organization. They must assist and advise not to invest the company’s financial resources into unprofitable projects.
- The organization have objective to maintenance of cash flow i.e. inflow and outflow of cash to continue business.
- To ensure regular and adequate supply of funds to the concern.
Functions of Financial Management
- Estimation of required capital: In financial management the required cost for organization is estimated.
- Determination of capital composition: It determines the composition of capital in different activities.
- Source of Finance: To estimate the source of finance this helps to maintain inflow and outflow of cash.
- Investment of fund: The finance manager has to decide to allocate funds into profitable ventures so that there is safety on investment and regular returns is possible.
- Management of cash: Finance manager has to make decisions with regards to cash management. Because cash is the only source which helps to continue business.