One may not like to invest on a project which may be risky even though there may be more profits. The interested parties of the financial statements are thinking that the values shown in the financial statements to be real and absolute. In the medium and long term, funding may be required for significant additions to the productive capacity of the business or to make acquisitions. Taking part in utilising the funds and controlling productivity. Content Filtration 6. Terms of Service 7. It will be better if Cash Flow Statement is regularly prepared so that one is able to find out various sources and applications. The cash management should be such that neither there is a shortage of it and nor it is idle. A decision about the kind of securities to be employed and the proportion in which these should be used is an important decision which influences the short-term and long-term financial planning of an enterprise. All this information will help in efficient management of cash. While spending on various assets, the principles of safety, profitability and liquidity should not be ignored. Financial management is getting and using financial resources well to meet objectives. He has to assess various cash needs at different times and then make arrangements for arranging cash. The modern approach is a constant activity where the financial manager makes different financing decisions unlike the traditional method. Even in various categories of assets, a decision about the type of fixed or other assets will be essential. Investment accords incorporate investment in fixed assets known as capital budgeting. Even here if gestation period is longer, then share capital may be most suitable. To put it in other words, it is applying general management standards to the financial resources of the firm. While selecting a plant and machinery, even different categories of them may be available. In this approach, finance was required not for regular business operations but occasional events like reorganization, promotion, liquidation, expansion, etc. Cash management is also an important task of finance manager. Previous Next. This approach was initiated to procure and manage funds for the company. Estimating Financial Requirements 2. Plagiarism Prevention 5. Reasons why profit is not a sufficient objective: For a profit-making company, a better objective is the maximisation of shareholder wealth; this can be measured as total shareholder return (the dividend per share plus capital gain divided by initial share price). The traditional approach of finance management stayed until the 5th decade of the 20th century. Hence, this approach is regarded as narrow and defective. The inadequacy of funds will adversely affect the day-to-day working of the concern whereas excess funds may tempt a management to indulge in extravagant spending or speculative activities. The main elements of this approach are an evaluation of alternative utilisation of funds, capital budgeting, financial planning, ascertainment of financial standards for the business success, determination of cost of capital, working capital management, Management of income, etc. Therefore, to maximize revenue, the modern approach keeps a balance between liquidity and profitability. Profit maximisation is often assumed, incorrectly, to be the main objective of a business. Your email address will not be published. The market value of shares will also be influenced by the declaration of dividend and expected profitability in future. Management, Financial Management, Features. Account Disable 12. Enjoy the videos and music you love, upload original content, and share it all with friends, family, and the world on YouTube. A balance should be struck even in these principles. It was considered essential to have funds for such events and regarded as one of the crucial functions of a financial manager. The higher this percentage better may be the financial performance. It only focuses on the financial problems of corporate enterprises, so it narrows the opportunity of the finance function. Essays, Research Papers and Articles on Business Management, Top 5 Functions of a Finance Manager | Financial Management, Essay on Financial Management: Objectives, Scope and Functions, Infrastructure Finance: Features and Sources | Financial Management, Campaign Management: Origin, Meaning and Functionality. Hence, this approach is regarded as narrow and defective. Investments can help a firm maintain strong future cash flows by the achievement of key corporate objectives. This article throws light upon the top seven features of financial management. Entirely depending upon overdrafts and cash credits for meeting working capital needs may not be suitable. With technological improvement, increase competition, and the development of strong corporate, it was important for Management to use the available financial resources in its best possible way. However, Net profits are classified into two(2) types: Dividend for shareholders: The rate of dividend and the amount of dividend has to be decided, Retained profits: The amount of contained (retained) gains has to be ascertained which would rely upon the development and variety of strategies of the trading concern. In the short term, funding may be needed to invest in equipment and stocks, pay employees and fund sales made on credit. Financial control devices generally used are: Return on investment is the best control device to evaluate the performance of various financial policies. A decision will have to be taken as to which assets are to be purchased? The need, purpose, object and cost involved may be the factors influencing the selection of a suitable source of financing. After preparing a capital structure, an appropriate source of finance is selected. The traditional approach of finance management stayed until the 5th decade of the 20th century. The amount required for purchasing fixed assets as well as needs of funds for working capital will have to be ascertained. JRFM was formerly edited by Prof. Dr. Raymond A.K. A judicious use of surpluses is essential for expansion and diversification plans and also in protecting the interests of shareholders. The three critical decisions taken under this approach are. If the concern does not want to tie down assets as securities then public deposits may be a suitable source. (ii) Issue of financial devices to collect refunds from the capital market. Purpose of Financial Management 1 / 2. Implementing Financial Controls 7. If cost of raising funds is very high then such sources may not be useful for long. (in projects or takeovers or working capital) need to be analysed to ensure that they are beneficial to the investor. Generally, financial statements are prepared in order to disclose the financial position of business concerns at a point of time and also operating results during the period under review. Nature of Financial Statements. Management need to ensure that enough funding is available at the right time to meet the needs of the business. Cox and published by Prof. Dr. Alan Wong online in one yearly volume from 2008 until end 2012. The key aspects of financial decision-making relate to investment, financing and dividends: • Investments must be financed in some way – however there are always financing alternatives that can be considered. A proper idea on sources of cash inflow may also enable to assess the utility of various sources. Prohibited Content 3. Huge Collection of Essays, Research Papers and Articles on Business Management shared by visitors and users like you. Therefore, the traditional approach became inefficient in a growing business environment.


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