Financial Management – Meaning, Objectives and Functions. Meaning of Financial Management

Financial Management – Meaning, Objectives and Functions. Meaning of Financial Management

Financial Management means preparing, arranging, directing and managing the economic tasks such as procurement and utilization of funds regarding the enterprise. It indicates using management that is general to economic sourced elements of the enterprise.


Investment choices includes investment in fixed assets (called as money cost management). Investment in present assets will also be section of investment choices called as performing capital decisions.

Financial choices – They relate with the raising of finance from different resources that will rely on choice on sort of supply, amount of financing, price of funding and also the returns therefore.

Dividend decision – The finance manager has to just just take choice based on the web revenue circulation. Web earnings are often split into two:

  1. Dividend for shareholders- Dividend plus the price from it needs to be determined.
  2. Retained earnings- number of retained earnings has got to be finalized that will rely upon diversification and expansion plans associated with enterprise.

Goals of Financial Management

The monetary management is generally speaking focused on procurement, allocation and control of economic sources of a problem. The goals can be-

To make certain regular and supply that is adequate of towards the concern.

To make certain sufficient returns to your investors that may rely upon the capacity that is earning selling price of this share, objectives regarding the investors.

To guarantee maximum funds utilization. When the funds are procured, they must be found in optimum feasible method at minimum price.

To make sure security on investment, in other words, funds must be committed to safe ventures to ensure that rate that is adequate of is possible.

To prepare a capital that is sound should really be sound and reasonable structure of money in order for a stability is maintained between financial obligation and equity money.

Functions of Financial Management

Estimation of capital demands: A finance supervisor needs to make estimation regarding money needs for the business. This can rely on anticipated expenses and earnings and programmes which are future policies of a problem. Estimations need to be manufactured in a sufficient way which increases making capability of enterprise.

Determination of money structure: after the estimation were made, the administrative centre framework need to be determined. This involves short- term and long- term debt equity analysis. This can rely upon the percentage of equity money an organization is possessing and funds that are additional need to be raised from outside events.

  • Range of resources of funds: For extra funds to be procured, a business has choices that are many-
    1. Problem of stocks and debentures
    2. Loans you need to take from banking institutions and banking institutions
    3. Public deposits to be drawn like in type of bonds.

    Selection of element is determined by relative merits and demerits of each and every period and source of funding.

    Investment of funds: The finance manager has got to opt to allocate funds into lucrative ventures to ensure that there clearly was security on investment and returns that are regular feasible.

  • Disposal of surplus: the profits that are net need to be created by the finance supervisor. This is done in two methods:
    1. Dividend statement – it provides determining the price of dividends as well as other advantages like bonus.
    2. Retained earnings – the amount has to be determined that will rely on expansional, innovational, diversification plans regarding the business.

    Handling of money: Finance supervisor needs to make choices when it comes to cash administration. Money is necessary for all purposes like re payment of wages and salaries, re re re payment of electricity and water bills, re re payment to creditors, fulfilling liabilities that are current maintainance of sufficient stock, purchase of recycleables, etc.

    Financial controls: The finance supervisor hasn’t simply to prepare, procure and make use of the funds but he even offers to work out control of funds. This is often done through numerous practices like ratio analysis, economic forecasting, expense and revenue control, etc.

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