Financial management is the business function concerned with profitability, expenses, cash and credit, so that the "organization may have the means to carry out its objective as satisfactorily as possible;" [1] the latter often defined as maximizing the value of the firm for stockholders.
Financial Management is concerned with efficient acquisition and deployment of both short- and long-term financial resources, to ensure the objectives of the enterprise are achieved.[3]
Maintaining proper cash flow is a short run objective of financial management. It is necessary for operations to pay the day-to-day expenses e.g. raw material, electricity bills, wages, rent etc. A good cash flow ensures the survival of company; see cashflow forecast.
Minimization on capital cost in financial management can help operations gain more profit.
Estimating the Requirement of Funds:[4] Businesses make forecast on funds needed in both short run and long run, hence, they can improve the efficiency of funding. The estimation is based on the budget e.g. sales budget, production budget; see Budget analyst.
Determining the Capital Structure: Capital structure is how a firm finances its overall operations and growth by using different sources of funds.[5] Once the requirement of funds has estimated, the financial manager should decide the mix of debt and equity and also types of debt.
Relationship with other areas of finance
Two areas of finance directly overlap financial management: (i) Managerial finance is the (academic) branch of finance concerned with the managerial significance of financial techniques; (ii) Corporate finance is mainly concerned with the longer term capital budgeting, and typically is more relevant to large corporations.
The term "financial management" refers to a company's financial strategy, while personal finance or financial life management refers to an individual's management strategy. A financial planner, or personal financial planner, is a professional who prepares financial plans here.
Financial management systems
Financial management systems are the software and technology used by organizations to connect, store, and report on assets, income, and expenses.[6]
^"Definition of Financial Management System (FMS) - Gartner Finance Glossary". Gartner. Retrieved 2022-01-06.
Further reading
Lawrence Gitman and Chad J. Zutter (2019). Principles of Managerial Finance, 14th edition, Addison-Wesley Publishing, ISBN978-0133507690.
Clive Marsh (2009). Mastering Financial Management, Financial Times Prentice Hall ISBN978-0-273-72454-4
James Van Horne and John Wachowicz (2009). Fundamentals of Financial Management, 13th ed., Pearson Education Limited. ISBN9705614229
February 05, 2023
financial, management, this, article, needs, additional, citations, verification, please, help, improve, this, article, adding, citations, reliable, sources, unsourced, material, challenged, removed, find, sources, news, newspapers, books, scholar, jstor, nove. This article needs additional citations for verification Please help improve this article by adding citations to reliable sources Unsourced material may be challenged and removed Find sources Financial management news newspapers books scholar JSTOR November 2015 Learn how and when to remove this template message Financial management is the business function concerned with profitability expenses cash and credit so that the organization may have the means to carry out its objective as satisfactorily as possible 1 the latter often defined as maximizing the value of the firm for stockholders Financial managers 2 FM are specialized professionals directly reporting to senior management often the financial director FD the function is seen as Staff and not Line Financial Management is concerned with efficient acquisition and deployment of both short and long term financial resources to ensure the objectives of the enterprise are achieved 3 Contents 1 Role 2 Relationship with other areas of finance 3 Financial management systems 4 See also 5 References 6 Further readingRole EditFurther information Financial analyst Corporate and other See also Managerial finance Financial risk management Corporate finance and Financial modeling Accounting Financial management is generally concerned with short term working capital management focusing on current assets and current liabilities and managing fluctuations in foreign currency and product cycles often through hedging The function also entails the efficient and effective day to day management of funds and thus overlaps treasury management It is also involved with long term strategic financial management focused on i a capital structure management including capital raising capital budgeting capital allocation between business units or products and dividend policy these latter in large corporates being more the domain of corporate finance Specific tasks Profit maximization happens when marginal cost is equal to marginal revenue This is the main objective of Financial Management Maintaining proper cash flow is a short run objective of financial management It is necessary for operations to pay the day to day expenses e g raw material electricity bills wages rent etc A good cash flow ensures the survival of company see cashflow forecast Minimization on capital cost in financial management can help operations gain more profit Estimating the Requirement of Funds 4 Businesses make forecast on funds needed in both short run and long run hence they can improve the efficiency of funding The estimation is based on the budget e g sales budget production budget see Budget analyst Determining the Capital Structure Capital structure is how a firm finances its overall operations and growth by using different sources of funds 5 Once the requirement of funds has estimated the financial manager should decide the mix of debt and equity and also types of debt Relationship with other areas of finance EditTwo areas of finance directly overlap financial management i Managerial finance is the academic branch of finance concerned with the managerial significance of financial techniques ii Corporate finance is mainly concerned with the longer term capital budgeting and typically is more relevant to large corporations Investment management also related is the professional asset management of various securities shares bonds and other securities assets In the context of financial management the function sits with treasury usually the management of the various short term financial legal instruments contractual duties obligations or rights appropriate to the company s cash and liquidity management requirements See Treasury management Functions The term financial management refers to a company s financial strategy while personal finance or financial life management refers to an individual s management strategy A financial planner or personal financial planner is a professional who prepares financial plans here Financial management systems EditFinancial management systems are the software and technology used by organizations to connect store and report on assets income and expenses 6 See also EditFinancial management for IT services financial management of IT assets and resources Financial Management Service a bureau of the U S Treasury which provides financial services for the government Financial mismanagement Financial risk management Corporate finance FP amp AReferences Edit Wikiquote has quotations related to Financial management Howard amp Opton Business Finance and Financial Management UpFina Retrieved 2015 11 04 Financial Managers Bureau of Labor Statistics Financial Management Kaplan Financial Budget Analysts Bureau of Labor Statistics Capital Structure Definition Investopedia Investopedia Retrieved 2015 11 04 Definition of Financial Management System FMS Gartner Finance Glossary Gartner Retrieved 2022 01 06 Further reading EditLawrence Gitman and Chad J Zutter 2019 Principles of Managerial Finance 14th edition Addison Wesley Publishing ISBN 978 0133507690 Clive Marsh 2009 Mastering Financial Management Financial Times Prentice Hall ISBN 978 0 273 72454 4 James Van Horne and John Wachowicz 2009 Fundamentals of Financial Management 13th ed Pearson Education Limited ISBN 9705614229 Retrieved from https en wikipedia org w index php title Financial management amp oldid 1137442888, wikipedia, wiki, book, books, library,
