If this management will not be present in the company then there will be a higher possibility of having a shortage or surplus of finance. This means the estimations related to the requirement of capital to start or run a business, the need for fixed and working capital of the company, etc., can be done with effective management of finance. Proper Estimation of Financial Requirementsįinancial management also helps the finance manager in estimating the proper financial needs of the company. Because it helps the business to deal with uncertainty, timely payment of dues, getting cash discounts, making day-to-day payments without delays, etc. Healthy cash flow means a higher possibility of survival and success of the business. The finance manager is responsible to maintain an optimal level of liquidity in the organization. To maintain the proper cash flow, the manager must keep an eye over all the inflows and outflows of money to reduce the risk of underflow and overflow of cash. With the help of proper financial management, the manager can easily monitor the regular supply of liquidity in the company. In nutshell, the finance manager focuses on maximizing the value of shareholders. Better performance means a higher value of shares in the financial market. But this is based on the performance of the company and the amount of profit earned. A proper dividend policy related to the declaration of dividends or retaining the company's profit for future growth and development is part of dividend decisions. The declaration of dividend and payout policy is decided with the help of financial management. The finance manager should try to distribute maximum dividends among the shareholders to keep them happy and to improve the goodwill of the company in the financial market. Hence, the company must focus on maximizing the value or wealth of shareholders. Shareholders are the actual owners of the company. For this purpose, he/she should properly use various methods and tools available. The manager must be focused on earning more and more profit. The finance manager is responsible to achieve optimal profit in the short run and long run of the business. Hence, it is the most important objective of financial management. Profit MaximizationĪ business is set up with the main aim of earning huge profits. Some of the prime objectives of financial management are as follows: 1. This boom must come with the growth of the organization, with the increase in profits, and with the satisfaction of all the parties which are directly or indirectly associated with the firm. Increased value of shares fulfills many other objectives also but it does not means that the manager should use manipulative activities to raise the prices of the shares. So the decisions which increase the value of the share in the market are considered to be good and fruitful. His/her decisions should be gainful for the shareholders as well as the company. Objectives of Financial ManagementĪ financial manager is responsible for making the decisions to bring effective financial management to the organization. Financial management helps in finding the answer to various questions like what should be the size and composition of fixed assets, what should be the amount and composition of current assets, what should be the amount of long-term and short-term financing, what should be the fixed debt-equity ratio in the capital, etc. Next → ← prev Objectives of Financial Managementįinancial Management refers to the process of efficient acquisition, utilization, and distribution of finance and then disposal of surplus or profit to run the organization smoothly.
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