Financial Management means the efficient and effective management of money (funds) in such a manner as to accomplish the objectives of the organization. It is the specialized functions directly associated with the top management. The significance of this function is not only seen in the 'Line' but also in the capacity of 'Staff' in overall administration of a company. It has been defined differently by different experts in the field. It includes how to raise the capital, how to allocate it i.e. capital budgeting. Not only about long term budgeting but also how to allocate the short term resources like current assets. It also deals with the dividend policies of the share holders. Definitions of Financial Management
“Financial Management is the Operational Activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operation.” by Joseph Massie “Business finance deals primarily with rising administering and disbursing funds by privately owned business units operating in non-financial fields of industry.” – by Prather and Wert “Financial Management is an area of financial decision making, harmonizing individual motives and enterprise goals.” By Weston and Brigham “Financial management is the area of business management devoted to a judicious use of capital and a careful selection of sources of capital in order to enable a business firm to move in the direction of reaching its goals.” – by J.F.Bradlery “Financial management is the application of the planning and control function to the finance function.” – by Archer & Ambrosio “Financial management may be defined as that area or set of administrative function in an organization which relate with arrangement of cash and credit so that organization may have the means to carry out its objective as satisfactorily as possible .“ - by Howard & Opton. Business finance can be broadly defined as the activity concerned with planning, raising, controlling and administering of funds and in the business. “ by H.G Gathman & H.E Dougall
Scope of Financial Management
Financial management has a wide scope. According to Dr. S. C. Saxena, the scope of financial management includes the following five 'A's. Anticipation : Financial management estimates the financial needs of the company. That is, it finds out how much finance is required by the company. Acquisition : It collects finance for the company from different sources. Allocation : It uses this collected finance to purchase fixed and current assets for the company. Appropriation : It divides the company's profits among the shareholders, debenture holders, etc. It keeps a part of the profits as reserves. Assessment : It also controls all the financial activities of the company. Financial management is the most important functional area of management. All other functional areas such as production management, marketing management, personnel management, etc. depends on Financial management. Efficient financial management is required for survival, growth and success of the company or firm.
2)RATIONALE: IMPORTANCE & SIGNIFICANCE OF THE STUDY OF FINANCIAL MANAGEMENT The importance of financial administration can be discussed under the following heads:-
(i) success of Promotion Depends on Financial Administration. One of the most important reasons of failures of business promotions is a defective financial plan. If the plan adopted fails to provide sufficient capital to meet the requirement of fixed and fluctuating capital an particularly, the latter, or it fails to assume the obligations by the corporations without establishing earning power, the business cannot be carried on successfully. Hence sound financial plan is very necessary for the success of business enterprise.
(ii) Smooth Running of an Enterprise. Sound Financial planning is necessary for the smooth running of an enterprise. Money is to an enterprise, what oil is to an engine. As, Finance is...
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