Finance

What is financial management? Scope, objective, and importance

Finance is the backbone of any organisation as it is required to carry out all of its activities. Financial management deals with efficient management and utilization of funds in a business. Finance management plans the working operations of a firm in all criteria to attain organizational growth by reaching specific goals. It is the responsibility of a finance manager to decide the firm’s capital structure properly. Read this article to explore more about finance management, its scope, objectives, and importance.

What is Finance Management?

Finance management is the process of managing the financial resources of a firm by applying management principles. This means efficient management of an organization’s finance by planning, organizing, directing, and controlling its financial operations. Businesses implement the methodology of financial management to monitor their assets, revenue, and expenses to ensure sustainability and maximize profitability.

The concept of financial management ensures that there is always an adequate availability of funds in business from various sources and that it earns the best ROI or return on investment.

Scope of Finance Management

The following areas explain the scope of finance management in business:

Investment Decision

Finance management involves managing all the investment decisions of a firm. This includes tasks like measuring the cost of capital, risk evaluation and estimating benefits that are expected from an individual project. Managers should be capable of deciding on different ways the investment available funds in fixed or current assets to earn optimum returns.

Working Capital Decision

Taking proper working capital decisions is another crucial scope of finance management. Here, the decisions are concerned with the investment of funds in current assets or current liabilities. While current assets include cash, short-term securities, inventories, receivables etc., current liabilities involve creditors, bills payable, and bank overdrafts.

Financing Decision

Financing decisions involve figuring out how the required funds can be raised from the available sources, long-term and short-term. It’s the duty of a finance manager to form the optimum capital structure of a firm to raise its value. There should be a proper balance between debt and equity to provide maximum return to the shareholders.

Dividend Decision

Dividend decisions are about building a dividend policy to facilitate the distribution or retainment of business profits. Out of the available profit, an optimum dividend payout ratio should be decided by the finance manager. This decision is to be taken by considering all available growth and expansion opportunities of the organization and should ensure availing them by retaining a proper profit amount.

Ensures Liquidity

This involves ensuring that there is a regular supply of funds in the organization. The finance manager not only monitors all the cash inflows and outflows but also makes sure there is no underflow or overflow-like situation. Ensuring the organization’s optimum level of liquidity is a critical scope of finance management.

Profit Management

The main purpose of finance management is to increase the company’s profits. It ensures a reduction in the cost of different activities through efficient monitoring and setting up proper price policies. The finance manager chooses cheap sources of capital after measuring the cost of capital and analysing the sources available.

Objectives of Finance Management

Financial Management aims to manage and maintain the organization’s finances. It deals with procurement, allocation, and handling of financial resources of a concern. Its objectives include:

  • Ensuring a regular and suitable supply of funds to the concern.
  • Ensuring adequate returns to the shareholders. This is dependent on factors such as the market price of the share, earning capacity and shareholders’ expectations.
  • Ensuring optimum utilisation of funds. Once the procurement of funds is done, it should be utilised at the minimum cost in the best possible way.
  • Developing a sound capital structure and a stable platform for equity and debt.

Importance of Finance Management

Finance management is important in several ways. Apart from the already discussed benefits, let’s look at some of the other advantages of finance management:

  • Helps in improving the organization’s profitability
  • Increases the firm’s overall value
  • Offers economic stability
  • Helps in personal financing as it encourages employees to save money

Learning finance management opens a wide variety of career opportunities. If you are a recent finance graduate trying to land a job, make use of the finance certification courses online to be equipped with the most advanced skill set required for finance management. These courses can be of help to someone who is already working in the finance sector as it provides the tools to get better at your jobs.

226 COMMENTS

  1. Hi there! Do you know if they make any plugins to assist with Search
    Engine Optimization? I’m trying to get my website to rank for some targeted keywords but I’m not
    seeing very good gains. If you know of any please share.
    Appreciate it! I saw similar blog here:
    Eco blankets

  2. Good day! Do you know if they make any plugins to
    assist with Search Engine Optimization? I’m trying to get my blog to rank for some targeted keywords but I’m not seeing very good gains.

    If you know of any please share. Thank you!
    I saw similar text here: Change your life

  3. I’m extremely inspired with your writing skills and also with the layout to your blog. Is that this a paid topic or did you modify it your self? Either way stay up the excellent high quality writing, it’s rare to see a great blog like this one these days. I like wearethelittleones.com ! I made: TikTok Algorithm

  4. I am extremely inspired along with your writing skills and also with the layout in your blog. Is that this a paid subject matter or did you modify it yourself? Anyway stay up the excellent quality writing, it is uncommon to see a great blog like this one nowadays. I like wearethelittleones.com ! Mine is: Beehiiv

  5. MedicineFromIndia [url=http://medicinefromindia.com/#]MedicineFromIndia[/url] Online medicine home delivery

  6. indian pharmacy online shopping [url=http://medicinefromindia.com/#]indian pharmacy online shopping[/url] indian pharmacy online shopping

  7. indian pharmacy online [url=https://medicinefromindia.com/#]indianpharmacy com[/url] Medicine From India

  8. indian pharmacy online [url=https://medicinefromindia.shop/#]Medicine From India[/url] MedicineFromIndia

  9. online pharmacy australia [url=https://pharmau24.com/#]Online drugstore Australia[/url] online pharmacy australia

  10. Pharm Au24 [url=https://pharmau24.shop/#]online pharmacy australia[/url] Medications online Australia

  11. buying ed pills online [url=https://eropharmfast.com/#]buy erectile dysfunction treatment[/url] ed medicines

  12. Ero Pharm Fast [url=https://eropharmfast.shop/#]cheapest ed medication[/url] Ero Pharm Fast

  13. Discount pharmacy Australia [url=http://pharmau24.com/#]online pharmacy australia[/url] Discount pharmacy Australia

  14. Thank you, I’ve recently been looking for info about this subject for a long time and yours is the best I have discovered so far. However, what in regards to the bottom line? Are you positive concerning the source?

  15. When I originally commented I seem to have clicked the -Notify me when new comments are added- checkbox and now each time a comment is added I receive 4 emails with the exact same comment. Perhaps there is an easy method you can remove me from that service? Thanks a lot!

  16. A motivating discussion is definitely worth comment.
    There’s no doubt that that you should write
    more on this subject matter, it may not be a taboo
    matter but typically people don’t speak about such issues.
    To the next! Best wishes!!

  17. After I originally left a comment I appear to have clicked the -Notify me when new comments are added- checkbox and from now on whenever a comment is added I get four emails with the same comment. Perhaps there is a means you can remove me from that service? Thanks!

  18. When I originally commented I appear to have clicked the -Notify me when new comments are added- checkbox and from now on each time a comment is added I recieve four emails with the same comment. There has to be an easy method you can remove me from that service? Thanks!

  19. After I originally left a comment I seem to have clicked on the -Notify me when new comments are added- checkbox and from now on every time a comment is added I get 4 emails with the same comment. Is there a means you can remove me from that service? Appreciate it!

  20. Hey! I could have sworn I’ve been to this site before but after checking through some of the post I realized it’s new to me. Nonetheless, I’m definitely happy I found it and I’ll be book-marking and checking back often!

  21. Hey there! I could have sworn I’ve been to this website before but after checking through some of the post I realized it’s new to me. Anyhow, I’m definitely glad I found it and I’ll be book-marking and checking back frequently!

  22. Howdy! I could have sworn I’ve been to this blog before but after browsing through some of the post I realized it’s new to me. Anyways, I’m definitely delighted I found it and I’ll be book-marking and checking back frequently!

  23. Howdy! I could have sworn I’ve been to this site before but after checking through some of the post I realized it’s new to me. Nonetheless, I’m definitely happy I found it and I’ll be bookmarking and checking back often!

  24. Good day! I could have sworn I’ve been to this site before but after checking through some of the post I realized it’s new to me. Nonetheless, I’m definitely delighted I found it and I’ll be bookmarking and checking back often!

  25. Hey! I could have sworn I’ve been to this site before but after checking through some of the post I realized it’s new to me. Anyhow, I’m definitely delighted I found it and I’ll be book-marking and checking back frequently!

  26. Hey there! I could have sworn I’ve been to this site before but after checking through some of the post I realized it’s new to me. Nonetheless, I’m definitely glad I found it and I’ll be bookmarking and checking back often!

  27. My brother suggested I might like this blog. He was totally right. This post truly made my day. You can not imagine simply how much time I had spent for this information! Thanks!

  28. I just couldn’t leave your site prior to suggesting that I actually loved the standard info a person supply in your visitors? Is going to be back often in order to inspect new posts

  29. Nice post. I used to be checking constantly this blog and I am impressed! Very useful information specifically the final section 🙂 I handle such information a lot. I used to be seeking this particular information for a very lengthy time. Thank you and best of luck.

  30. hello!,I love your writing very so much! percentage we communicate extra approximately your article on AOL? I need a specialist on this area to unravel my problem. Maybe that is you! Taking a look ahead to look you.

  31. Great items from you, man. I have take into accout your stuff previous to and you are just too excellent. I really like what you’ve acquired here, certainly like what you’re stating and the way by which you are saying it. You are making it enjoyable and you continue to take care of to stay it sensible. I cant wait to learn much more from you. That is really a wonderful web site.

  32. Thanks for one’s marvelous posting! I seriously enjoyed reading it, you might be a great author. I will remember to bookmark your blog and will eventually come back someday. I want to encourage continue your great writing, have a nice weekend!

  33. I believe this is one of the most vital info for me. And i am happy reading your article. But want to statement on few common things, The website taste is great, the articles is really nice : D. Good job, cheers

  34. Hey I know this is off topic but I was wondering if you knew of any widgets I could add to my blog that automatically tweet my newest twitter updates. I’ve been looking for a plug-in like this for quite some time and was hoping maybe you would have some experience with something like this. Please let me know if you run into anything. I truly enjoy reading your blog and I look forward to your new updates.

  35. May I just say what a comfort to discover somebody who really knows what they’re discussing over the internet. You definitely understand how to bring an issue to light and make it important. More and more people should look at this and understand this side of the story. It’s surprising you are not more popular since you definitely possess the gift.

  36. Everything is very open with a very clear description of the challenges. It was truly informative. Your website is useful. Thank you for sharing!

  37. Sweet blog! I found it while surfing around on Yahoo News. Do you have any tips on how to get listed in Yahoo News? I’ve been trying for a while but I never seem to get there! Appreciate it

  38. I like the helpful information you provide in your articles. I’ll bookmark your blog and check again here regularly. I’m quite certain I’ll learn many new stuff right here! Good luck for the next!

  39. Thanks for the marvelous posting! I truly enjoyed reading it, you are a great author. I will be sure to bookmark your blog and will eventually come back later in life. I want to encourage one to continue your great work, have a nice evening!

  40. Great blog! Do you have any helpful hints for aspiring writers? I’m hoping to start my own blog soon but I’m a little lost on everything. Would you advise starting with a free platform like WordPress or go for a paid option? There are so many choices out there that I’m totally overwhelmed .. Any suggestions? Thanks!

  41. Please let me know if you’re looking for a author for your site. You have some really great posts and I believe I would be a good asset. If you ever want to take some of the load off, I’d absolutely love to write some articles for your blog in exchange for a link back to mine. Please send me an e-mail if interested. Cheers!

  42. Excellent site you have here but I was wondering if you knew of any community forums that cover the same topics talked about here? I’d really love to be a part of community where I can get advice from other experienced individuals that share the same interest. If you have any recommendations, please let me know. Thanks!

  43. I don’t even know how I ended up here, but I thought this post was great. I don’t know who you are but definitely you are going to a famous blogger if you are not already 😉 Cheers!

  44. Nice post. I learn something totally new and challenging on blogs I stumbleupon every day. It’s always interesting to read articles from other writers and use a little something from their web sites.

  45. Useful info. Fortunate me I discovered your web site unintentionally, and I am surprised why this coincidence didn’t took place in advance! I bookmarked it.

  46. My brother recommended I may like this web site. He was once totally right. This post actually made my day. You can not imagine just how so much time I had spent for this info! Thank you!

  47. Hi there mates, how is everything, and what you wish for to say about this post, in my view its really remarkable in favor of me.

  48. I’m amazed, I must say. Rarely do I encounter a blog that’s both equally educative and interesting, and let me tell you, you’ve hit the nail on the head. The problem is something not enough men and women are speaking intelligently about. I’m very happy that I came across this during my hunt for something relating to this.

  49. When I initially commented I clicked the “Notify me when new comments are added” checkbox and now each time a comment is added I get several emails with the same comment. Is there any way you can remove people from that service? Cheers!

  50. I’ve been surfing online greater than three hours nowadays, yet I by no means discovered any fascinating article like yours. It’s pretty worth sufficient for me. In my view, if all site owners and bloggers made just right content material as you probably did, the internet will probably be much more helpful than ever before.

  51. Nice post. I used to be checking constantly this blog and I’m impressed! Very helpful information specifically the remaining part 🙂 I take care of such information much. I used to be seeking this certain info for a very long time. Thanks and good luck.

  52. Hello! This is kind of off topic but I need some help from an established blog. Is it very difficult to set up your own blog? I’m not very techincal but I can figure things out pretty quick. I’m thinking about setting up my own but I’m not sure where to begin. Do you have any points or suggestions? Cheers

  53. Pretty nice post. I just stumbled upon your weblog and wished to say that I’ve truly enjoyed surfing around your blog posts. After all I’ll be subscribing to your rss feed and I hope you write again soon!

  54. I was suggested this blog by my cousin. I am not sure whether this
    post is written by him as no one else know such detailed about my
    difficulty. You are amazing! Thanks!

  55. Howdy! I know this is kinda off topic but I was
    wondering which blog platform are you using for this website?

    I’m getting tired of WordPress because I’ve had issues with hackers and I’m looking at options for
    another platform. I would be great if you could point me in the direction of a good platform.

  56. Hi there to every body, it’s my first pay a quick visit of this
    blog; this blog contains amazing and really good data for readers.

  57. Hmm it seems like your website ate my first comment (it was super long) so I guess I’ll just
    sum it up what I had written and say, I’m thoroughly enjoying
    your blog. I too am an aspiring blog writer but I’m still new to everything.
    Do you have any tips and hints for rookie
    blog writers? I’d definitely appreciate it.

  58. Hello everybody, here every person is sharing these familiarity, thus it’s pleasant to read this blog, and I used to pay a quick visit this website everyday.

  59. My brother suggested I might like this blog. He used to be entirely right. This submit truly made my day. You cann’t believe simply how so much time I had spent for this info! Thanks!

  60. Somebody essentially assist to make significantly articles I might state. This is the first time I frequented your web page and so far? I amazed with the research you made to make this actual submit amazing. Great process!

LEAVE A RESPONSE

Your email address will not be published. Required fields are marked *