Financial Management:
- Financial Management is the process of arranging, designing, observing, and controlling financial resources in an organization.
- It is also considered as one of the most important factors in an organization for achieving the preset goals and objectives of any organization.
- Financial Management is the process of managing an organization’s fund as defined by the policy/rules of any organization for the objective of getting a higher return than its cost.
The main objective of Financial Management are :
- Accelerating return or profit:
- The basic objective of financial management is to accelerate return or maximize its profit in both the long and short run.
- It should also be liable to its shareholders by providing a maximum return on its share value.
- Sufficient supply of funds to the concern:
- Sufficient supply of funds to the concern is one of the most important factors to run the organization smoothly.
- It will also help to determine the production cost of any goods.
- Ensuring optimum funds utilization:
- The main objective of financial management is to maximize the return from minimum investment.
- It will help to identify the minimum fund required for production.
- Ensuring financial discipline:
- Financial Management sets the minimum criteria for the utilization of funds which acts/sets discipline for investment.
- Financial management monitors the fund requirement and utilization every day which will force the employee to perform their task being within the preset criteria.
- Survival of company in long term:
- Financial management helps to design the utilization of funds which thus will help to survive the company in long term.
- Minimum investment with high return helps to sustain the company for a long period.
Importance/Advantages of Financial Management are:
- It will advantage organization for financial planning:
Financial management will help organizations with financial planning which will decide financial necessities associated with the business concern.
- It will advantage for effective allocation and utilization of funds:
Whenever the financial export will make the allocation and utilization of funds wisely then it will advantage in minimizing the expenses and accelerate the profit on the organization.
- It will advantage for effective financial decision:
Financial decision is vital in any organization. The decision once made is hard to revise so the wrong decision will impact the whole organization’s operation system. So that, financial management will support the organization in making critical financial decisions.
- It will advantage in growth and stability of organization:
Financial management will help to grow the financial status of the organization and thus will help to be stable in the market by applying proper financial arrangement and design of the fund.
- It will advantage in tax planning:
Since financial management is based on designing the proper plan, it will help to identify the product of the goods and will ensure the requirement of funds for tax.
- It will advantage in capital reserves:
Financial management is all related to the growth of the organization by increasing the profit. The advantage of financial management is it helps to create capital reserves in the book of companies’ accounts.
References:
https://harappa.education/harappa-diaries/financial-management-objectives/
https://www.lsbf.org.uk/blog/news/importance-of-financial-management/117410