Finance | Financial Management



Finance by StudyShout, Financial Management by StudyShout, StudyShout


FINANCE:

Finance or Money is a very important factor in Financial Management. The Role of Finance Manager is to do Financial Planning. Financial Market transactions are done by financial management.


           Financial management takes decisions regarding the acquisition and allocation of fund or finance. Acquiring funds from various sources like issuing equity shares, preference shares and taking a loan from financial institutions & banks.


                   The company may invest finance in various sectors like the purchase of plant or machinery, and the purchase of raw materials. The finance department also takes the decision regarding the issue of shares. The company may issue either equity shares or preference shares or a combination of equity and preference shares.




FINANCIAL MANAGEMENT:



                   Finance is the lifeblood of every business unit. Companies get stability or growth due to financing. So, to manage each and every transaction related to finance, companies have the financial department. Finance department deals with all the transactions related to money or finance.

                             
                             In simple terms, the financial management means planning, organizing, directing and controlling of finance in the business. Finance management also includes the decision regarding the issue of shares and purchase of investments for the business. It is the responsibility of the finance department to handle all the monetary transactions.


                          The main function of financial management is to maintain the financial health of the organization. Finance management takes the decision regarding investment activities, procurement of funds and also develop long-term financial goals of the organization. The main functions of financial management are as follows:


  • Estimation of Capital Requirement
  • Determination of Capital Structure
  • Procurement of Finance
  • Utilization of Finance
  • Disposal of Profits or Surplus
  • Managing the Cash
  • Financial Control



                      So, the above listed are Financial Management Functions. These functions are followed by the finance department carefully. Before undertaking the financial management functions, the finance department must clear regarding the source of procurement, the amount of finance to be procured, how finance will be utilized, etc.


                       The finance department must procure or allocate the funds by considering various factors. The finance department also needs to manage an ideal working capital for the business. If the company carries excessive working capital, the surplus amount could be invested in other sources and if the company carries less working capital, business will face problems in managing the day to day transactions related with working capital. So, there must be an ideal working capital in hand.


Conclusion:

                      In simple terms, financial management means planning, organizing, directing, controlling and management of financial activities in the organization. Finance department takes various decisions related to financial decisions like investment in various sources, decisions regarding dividend payment, retained earnings decisions etc.


Books for Finance Management:


1. Financial Management: Theory & Practice









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Finance | Financial Management Finance | Financial Management Reviewed by Bhavik Chhuchha on October 19, 2018 Rating: 5

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