Financial management

financial management why is it pivotal in the smooth functioning of the organization by Virendra bBodele

1. FINANCIAL MANAGEMENT. WHY IS IT SO PIVOTAL IN THE SMOOTH FUNCTIONING OF THE ORGANIZATION By:- Virendra Bodele Dt:-04-11-2019

2. Meaning of Financial Management Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise.

3. Financial Management is vital to any company, whether or not tiny or huge. it's just like the lifeline of the business. it's also an important activity that has to be performed in any organization. However, financial management entails the method of designing, organizing, observance and conjointly dominant the financial resources of a corporation. the concept for doing such is to be able to succeed the vision or goals of the corporate at the stipulated timeframe. Financial Management could be a regular apply during a business surroundings. It involves managing a company’s financial resources to make sure there's very little or no wastage. It controls each single issue relating to the company’s financial activities which has the procurance of funds, use of funds, payments, accounting, risk assessment and alternative things that area unit associated with finances.

4. And that is one in all the explanations it's thought-about to be an integral a part of the company as a result of, while not correct use of funds, the business will go down. it'd additionally not have what it takes to hold out production or activities. The general principles of management also are applied to the monetary management of the corporate too. however the most focus shouldn’t be to make principles or department to manage the finances of the business . They must be established to follow the simplest practices, use the desired financial management tools and conjointly deploy the correct ways to attenuate price and guarantee production or business activities function smoothly.

5. Definition The most popular and acceptable definition of financial management as given by S.C.Kuchal is that “Financial Management deals with procurement of funds and their effective utilization in the business ”. Weston and Brigham : Financial Management “is an area of financial decision-making, harmonizing individual motives and enterprise goals”.

6. IMPORTANT It helps in future cash flow It considered the time value of money. This concept allows the dividend policy of the company to have its effect of the market value the equity shares. It also contributes to the maximization of other objectives of financial management. Cash flows from projects subject to greater risks are discounted at a higher discount rate

7. Objectives By increasing the sales and there by increasing the revenues. y reducing the cost of production through efficient use of the resources. By making judicious choice of funds. By minimizing risk

8. Objectives Ensuring maximum operational efficiency through planning, directing and controlling of the utilization of the funds. Enforcing financial discipline in the organization in the use of financial resources. Building up of adequate reserves for financing growth of expansion. Ensuring a fair return to the shareholders on their investments.

9. Role Business forecasting Determination of financial objectives, financial polices and operational procedures Estimation of the capital requirements of the business Designing the capital structure Determination of the proper sources of finance

10. Role Investment decision Ensuring supply of required funds Controlling the use of funds Profit planning Disposal of surplus or profit, or dividend decision Management of working capital Helping in valuation decisions

11. Role Wealth maximization Legal responsibilities Designing suitable system of providing information Keeping track of stock exchange quotations Co-ordination of the activities of subordinates

12. Role Responsibilities to shareholders Responsibilities to employees Responsibilities to various creditors Responsibilities to customers Responsibilities to the society

13. Functions of Financial Management Financial Planning and Forecasting It is the financial manager’s responsibility to set up and estimate the business’s monetary desires. He must offer details relating to the number of cash that will be needed to get completely different assets for the company . The management through the monetary manager must grasp what they have to pay on assets and stuck assets for the business too. Another important duty of the monetary manager is to create artistic movement plans for funds that the corporate would want. and therefore the manner during which the funds are accomplished and used is additionally of utmost importance to the financial manager.

14. Functions of Financial Management Determination of capital composition Once the Planning and Forecasting have been made, the capital structure have to be decided. The mix of debt and equity used to finance the company’s future profitable investment opportunities is referred to as capital structure.

15. Functions of Financial Management 3. Fund Investment The financial manager has got to make sure that funds created obtainable to the business are used adequately to grow the business. the price of effort the same fund and value of the returns have to be compelled to be compared and balanced. The financial manager additionally has to explore the channels of the business that's yielding higher returns and improve them.

16. Functions of Financial Management Maintain Proper Liquidity Cash is that the best supply for maintaining liquidity. The business needs it to shop for raw materials, pay salaries and tackle alternative financial wants of the company. However, the financial manager should verify if there's a requirement for quick assets. He conjointly should organize these assets during a manner that the business won’t expertise inadequacy of funds.

17. Functions of Financial Management Disposal of Surplus Selling surplus assets and investing in more productive ways will increase profitability and therefore increase the ROCE.

18. Functions of Financial Management 6. Financial Controls Financial control is also construed because the analysis of a company’s actual results, approached from totally views at different times, compared to its short, medium and long-run objectives and business plans.

19. C onclusion The financial management is a hot topic in the business world because of the importance of finance to the business. The reason for establishing a company is to make a profit and also run for many years. However, it’s the financial manager’s responsibility that the finances of the company are used adequately . I f all this thing you want proper and smooth you should apply financial management . This all things is very important to ran any company and financial management is fundamental function to do or control all this .

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