Business
Business
Business
Financial Management refers to the process of efficient acquisition, utilization, and distribu
then disposal of surplus or profit to run the organization smoothly. Financial management helps
to various questions like what should be the size and composition of fixed assets, what should
composition of current assets, what should be the amount of long-term and short-term financing
fixed debt-equity ratio in the capital, etc.
1. Profit Maximization
A business is set up with the main aim of earning huge profits. Hence, it is the most important
management. The finance manager is responsible to achieve optimal profit in the short run a
business. The manager must be focused on earning more and more profit. For this purpose, he/she
various methods and tools available.
2. Wealth Maximization
Shareholders are the actual owners of the company. Hence, the company must focus on max
wealth of shareholders. The finance manager should try to distribute maximum dividends among
keep them happy and to improve the goodwill of the company in the financial market. The declara
payout policy is decided with the help of financial management. A proper dividend policy related
dividends or retaining the company's profit for future growth and development is part of dividend
based on the performance of the company and the amount of profit earned. Better performance m
of shares in the financial market. In nutshell, the finance manager focuses on maximizing the value o
3. Maintenance of Liquidity
With the help of proper financial management, the manager can easily monitor the regular supp
company. But it is not as easy as it sounds. To maintain the proper cash flow, the manager must kee
inflows and outflows of money to reduce the risk of underflow and overflow of cash. The
responsible to maintain an optimal level of liquidity in the organization. Healthy cash flow means
survival and success of the business. Because it helps the business to deal with uncertainty, time
getting cash discounts, making day-to-day payments without delays, etc.
5. Proper Mobilization
Financial management helps in the effective utilization of sources of finance. It means withou
getting the maximum benefit from the available resources. The finance manager is responsib
different sources of funds such as shares, debentures, bonds, loans, etc. So, after estim
requirements, the manager must decide which source of the funds he/she should use to avail the m
6. Proper Utilization of Financial Resources
With proper financial management, the organization can make optimum utilization of financial r
this, a financial manager has various tools that he/she can use. They include managing
management of inventory, and effective payment policy in hand. This will not only save
organization but will also reduce the wastage of other resources.
7. Improved Efficiency
Financial management is also beneficial in increasing the efficiency of all sections and
organization. If the finance is effectively distributed to all the departments then they will work effic
the company to achieve its targets easily which will be further helpful for the growth of the entire co
8. Meeting Financial Commitments with Creditors
Financial management is helpful in the timely payment of dues to the creditors. The financial
the creditors, their due amount, and due date from the financial accounts and can make their pa
will increase the goodwill of the company in the market and creditors will also provide the good
credit without having any problem. So, if there will be strong management of finance then the com
meet the financial commitments with creditors easily.
9. Creating Reserves
The business environment is full of uncertainty such as sudden changes in customers' preferenc
natural calamity, change in technology, etc. To overcome such unplanned issues, the com
sufficient amount in the form of reserves. The company can create reserves over the year by
dividend payout policy. The company should also keep some part of profits in the form of reser
not only helpful in dealing with unwanted situations but also to expand the business and face
future. This benefit can only be taken if the company has effective management of finance.
10. Decreases the Cost of Capital
This objective includes measuring the cost of capital, risk evaluation, and calculating the approx
a particular project. Financial managers are responsible for the effective investments of available fu
fixed assets to get the maximum benefits or ROI.
If the company follows perfect financial management then it can get the benefits of all the given ob
helpful in the long-run survival of the business with a higher turnover and goodwill.
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