Financial Management and Its Basic Aspects for Business

“Financial management comprises of forecasting, planning, organizing, directing, co-ordinating and controlling of all activities relating to acquisition and application of the financial resources of an undertaking while keeping in view its financial objective.”

“Financial Management is concerned with managerial decisions that result in the acquisition and financing of short-term and long-term credits for the firm.”

“Financial management deals with procurement of funds and their effective utilization in the business.”

Financial management entails planning for the future of a person or a business enterprise to ensure a positive cash flow. It includes the administration and maintenance of financial assets. Besides, financial management covers the process of identifying and managing risks.

The primary concern of financial management is the assessment rather than the techniques of financial quantification. A financial manager looks at the available data to judge the performance of enterprises. Managerial finance is an interdisciplinary approach that borrows from both managerial accounting and corporate finance.

Some experts refer to financial management as the science of money management. The primary usage of this term is in the world of financing business activities. However, financial management is important at all levels of human existence because every entity needs to look after its finances.

Financial Management: Levels

Broadly speaking, the process of financial management takes place at two levels. At the individual level, financial management involves tailoring expenses according to the financial resources of an individual. Individuals with surplus cash or access to funding invest their money to make up for the impact of taxation and inflation. Else, they spend it on discretionary items. They need to be able to take the financial decisions that are intended to benefit them in the long run and help them achieve their financial goals.

“The management of all the processes associated with the efficient acquisition and deployment of both short and long-term financial resources.”

Basic Aspects of Financial Management There are two basic aspects of financial management viz., procurement of funds and effective use of these funds to achieve business objectives.

1. Procurement Of Fundso Funds can be obtained from different sourceso The sources may be;? Equity share capital ? Preference share capital? Long-term loans ? Debentureso Funds may be procured by way of Commercial paper, Deep Discount Bonds, Foreign Direct Investment (FDI), Foreign Institutional Investors (FII), American Depository Receipts (ADR), Global Depository Receipts (GDR) etc.o Different sources have different characteristics.o Procurement involves two different segments:i. Identification of the source of fund