Financial Management

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Lesson # 1
Financial Management: Introductory Notes and Words

Concepts of Finance and Financial Management

Financial Management refers to the proper management of finance functions of an enterprise or organization. In other words, financial management is concerned with the financial decision-making and other financial aspects. Thus, financial management involves financial planning, financial organization, financial coordination and control, financial reporting, financial mergers, combinations and acquisitions, insurance and tax management etc. Financial planning is concerned with the act of deciding in advance the financial activities that are essential if the enterprises are to achieve their financial goals and objectives. These
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Thus, it is seen that financial management is also closely related with the production management of a manufacturing enterprise.

Financial Management and Material/ Purchase Management

In case of manufacturing concerns material management is the vital one; while in case of trading concerns, the purchase management is very much significant. The purchase, movement, use and storage of production materials are fundamental management concerns in any manufacturing organization. Production material management deals with planning and scheduling of production functions; controlling the various types of inventories; purchasing materials and supplies; management of stores etc. In most of the material management functions, involvement of cash outlays is unavoidable. Production managers always try to make the best use of finance through careful scheduling of the sequence and timing of works and through the efficient control of buying, using and storing materials. Thus, it can be said that financial management is also closely related with materials/ purchase management.

Financial Management and Human Resource Management

People are the most valuable assets of an enterprise, which are not subject to depreciation like physical assets. Therefore, human resource management is the core of total management of an enterprise. Human Resource Management concerns with selection of the proper employees; methods of proper orientation and training of employees; policies and

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