Financial Management : Importance and Objectives Robert Smith Finance Consultant
Contents Introduction Importance of Financial Management Objectives of Financial Management Conclusion
Introduction It is the art and science of managing money. It is the duties of financial managers in a business firm. Financial management is all about obtaining funds and how to use that fund. Financial Management is a careful selection of the source of working capital. It includes financial planning, financial administration and financial control.
Importance of Financial Management Development and Economic Growth Improved Standard of Living Improved Health
Contd.. Creates Job Alleviation of Poverty Better Financial Decisions
Objectives of Financial Management Two main objectives of financial management are: 1. Profit Maximization 2. Wealth Maximization It provides a framework for optimum financial decision making. It operates internal investment and financing of the firm.
Contd.. Profit Maximization Profit/EPS maximization should be taken and those that decrease profit/EPS should be avoided. It deals with the allocation of resources. Here resources are working capital for business funding. Financial Management (FM) mainly depends on efficient economic resource i.e. capital. The technical flaws of Profit Maximization are: 1. Ambiguity 2 . Timing Benefits 3. Quality Benefits
Contd.. Wealth Maximization Wealth maximization is also known as value or net present worth maximization. It should satisfy all three requirement, i.e. exactness, quality and money value of time. The technical flaws of Wealth Maximization are: 1. Focus on Stakeholders : Stakeholders include groups of employees, investors and stakeholders which are directly related to the firm. 2. EVA (Economic Value Added) : EVA is equal to after tax operating benefits of a firm less the cost of the firm
Conclusion Financial Management is the mixture of financial planning, administration and control. Financial corporation deals with how corporation obtains the funds and how corporation allocates that funds.
References http://en.wikipedia.org/wiki/Financial_management https://48factoring.com/working-capital-financing http://www.managementstudyguide.com/financial-management.htm http://www.slideshare.net/anurag_toby/objectives-of-financial-management-26656656