What is Financial Management ? | it’s definition, Meaning and Objective

“Financial Management comprises the forecasting, planning, organizing, directing, coordinating and controlling of all activities relating to acquisition and application of the financial resources of an undertaking in keeping with its financial objective”

Basic Aspects of Financial Management

Procurement: Obtaining funds from different sources like equity, debentures, funding from banks, etc.

Effective Utilization of Funds: Employment of funds properly and profitably.

Stages of Evolution of Financial Management

Traditional Phase: During this phase, financial management was considered necessary only during occasional events such as takeovers, mergers, expansion, liquidation, etc.

Transitional Phase: In this Phase, the day-to-day problems faced by the financial managers were given importance.

Modern Phase: This phase is Still going on.

Objectives of Financial Management

Wealth / value maximization: The primary goal of a firm should be to maximize its market value and all the business decisions should seek to increase the net present value of the firm.

Profit maximization: It implies that the primary objective of a company is to earn profit.

Three Major decisions for Achievement of wealth Maximization

Investment decisions: These Decisions relate to the selection of assets in which funds will be invested by a firm.

Financing decisions: Acquiring the optimum finance to meet financial objectives and seeing that fixed and working capitals are effectively managed.

Dividend Decisions: Determination as to how much and how frequently cash can be paid out of the profits of an organization as income for its owners / shareholders.

Also, read Bitcoins in India What is Mutual Funds and Tax slabs in india

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