Financial Management: Roles and Objectives
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|1. Planning |Identify and Manage Risks |
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|2. Organizing |Adequate supply of funds |
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|3. Directing |Adequate returns to shareholders |
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Financial management has a role within the overall context of general management. The scope/elements of financial management are making investment, financial, dividend decision for an enterprise to survive. Finance is needed to promote or establish the enterprise, acquire fixed assets, make investigations such as market surveys. By developing product, keep men and machine at work encourages management to make progress and create values. The financial management is generally concerned with procurement, allocation and control of financial resources of an enterprise. These types of objectives are carried out within the United States financial system. The first object of financial management is to identify and manage risks. A finance manager has to make estimation with regards to capital requirements of the company. This will depend upon expected costs and profits and future programs and policies of a concern. Estimations have to be made in an adequate manner which increases earning capacity of enterprise. Second objective is to ensure regular and adequate supply of funds (Moyer, McGuigan, Rao & Kretlow, 2012). Third objective is to ensure adequate returns to the shareholders which depend upon the earning capacity, market price of the share and expectations of the shareholders. The net profits decision has to be made by the finance manager and this can be done in two ways: Dividend declaration is identifying the rate of dividend and
The financial mangers goal is acquisition, financing, and management of assets. The challenges are investment, financing, and asset management decisions.
There are four basic divisions of financial management one planning, two controlling, three reorganizing and directing and four decision making. The reason for four separate divisions are based on the purpose of each task.
Financial Management is an important aspect of how a business operates efficiently. The way that the finances are controlled can determine how successful the company is. The finances of a business allows for the growth of the company. The five practices of financial management: capital structure decision, investment appraisal techniques, dividend policy, working capital management and financial performance assessment are critical when assessing a company. The performance of a company plays a key role on how successful the company is on meeting goals. There are different strategies and tools that a company can implement and if they are used to effectively the company can meet their goals. If a company has good finances, a good
Financial Management: “The process for and the analysis of making financial decisions in the business context.” (Cornett, Adair, & Nofsinger, 2016, p. 5).
The finance function and its relation to other decision-making areas in the firm; the study of theory and techniques in acquisition and allocation of financial resources from an internal management perspective.
Second, financial managers use economic principles to guide them in making financial decisions that are in the best interest of the firm. In other words, finance is an applied area of economics that relies on accounting for input.
The primary role of finance is to plan for, acquire, and use resources to maximize the efficiency and value of the enterprise.
The purpose of a finance department is to assist the business in achieving profit levels. This can be achieved by;
The accounting system we use today started in Venice in renaissance period over 520 years ago. The trade business increased hugely during this time and all the financial recordings had to be written down to help people see how their business is doing. During that time in 1494 the first book about was published in accounting by Luca Paciolli and was called “The Collected Knowledge of Arithmetic, Geometry, Proportion and Proportionality”. He was called “The father of Accounting” and most of his described principles have been used up until this day.
Financial management is important to the organization because it provides pertinent finance and accounting information to help managers accomplish the purpose of the organization. Financial accounting provides accounting information to external users. On the other hand, managerial accounting is more for managers (internal users) to use for things like planning, budgeting, etc. The definition of finance has changed over the years, but it’s used to ultimately evaluate previous decisions and make assessments for future decisions of the organization.
The financial perspective uses financial performance measures to determine whether the organization’s strategy and actions are profitable. An organization’s financial goals may be as simple as: to survive, to succeed, and to prosper. Survival can be measured by cash flow, success can be measured by growth in sales and income, and prosperity can be measured by increased market share and return on equity. Managers are encouraged to use financial measures like these to demonstrate their financial position to shareholders. (Kaplan and Norton
Finance is the study of applying specific value to things we own, services we use and decisions we make. Financial management is the process for and the analysis of making financial decisions in the business context. The major subareas of finance are investments, financial management, financial institutions, market, and international finance. Risk is a potential future negative impact to value and or cash flow. It is often discussed in terms of probability of loss and the expected magnitude of the loss.
During organization, it is the task of the financial manager to choose on how to use the resources of the organization efficiently. Resources like funds or assets
Hence, the tasks involved in Financial Management include: Ø Analysing financial needs Ø Forecasting financial needs Ø Managing working capital Ø Planning capital structures Ø Organising financial operations Ø Monitoring and controlling finances etc. In fact raising funds and allocating funds for business are the two prime financial management tasks.
economy. The immediate effects of the economic condition impact that causes physical damage in global dynamic’ ripples cascade seen around the world. There are several critical primary financial management experiences every organization must face in the wake of economic reporting such as financial planning capital budgeting and capital structure. Financial planning is probably the most dynamic of the process for a Chief Financial Officer to understand the company’s performance. All this is taking place, and an effective financial decision making requires an understanding of working goals of the organization. In other words, it relates the ability to raise funds and the ability to manage risk in buying productive assets. This is a global environment in which tomorrow’s CFOs will operate (). Focusing on approach to working compatibly within a changing environment as the organization redistributes its goal.