Ø MEANING AND FEATURES OF FINANCIAL MANAGEMENT
A CONCEPTUAL
SERIES ON COMPETITIVE EXAM COMMERCE AND MGMT 4
Ø
FINANCIAL MANAGEMENT
·
MEANING OF FINANCIAL
u
IT WAS A BRANCH OF ECONOMICS TILL 1890 AND AS A SEPARATE DISCIPLINE IT IS OF RECENT ORIGIN, STILL IT HAS NO UNIQUE BODY OF KNOWLEDGE OF ITS OWN AND DRAWS
HEAVILY ON ECONOMICS FOR ITS THEORETICAL CONCEPTS EVEN TODAY.
u
THE TRADITIONAL APPROACH TO THE FINANCE
FUNCTION RELATES TO THE INITIAL STAGES OF ITS EVOLUTION DURING 1920 AND
1930.(CORPORATION FINANCE) . ACCORDING TO THIS
APPROACH,THE SCOPE OF FINANCE FUNCTION WAS CONFINED TO ONLY PROCUREMENT OF FUNDS NEEDED BY BUSINESS ON MOST SUITABLE TERMS AND THE UTILIZATION OF FUNDS
WAS CONSIDERED BEYOND THE PURVIEW OF THE FINANCE FUNCTION.
u
MODERN APPROACH
u
THE MODERN APPROACH VIEWS FINANCE FUNCTION IN BROADER SENSE. IT INCLUDES
BOTH RAISING OF FUNDS AS WELL AS THEIR EFFECTIVE UTILIZATION. THE MODERN
APPROACH CONSIDERS THE THREE BASIC MANAGEMENT DECISIONS I.E INVESTMENT DECISIONS,FINANCING DECISIONS AND DIVIDEND DECISIONS.
Ø
MEANING OF FINANCIAL MANAGEMENT
·
FINANCIAL MGMT IS THAT PART OF THE MANAGEMENT
WHICH IS CONCERNED WITH THE PLANNING AND CONTROLLING OF FIRM’S FINANCIAL
RESOURCES. IT DEALS WITH FINDING OUT VARIOUS SOURCES FOR RAISING FUNDS FOR THE
FIRM. THE SOURCES MUST BE SUITABLE AND ECONOMICAL FOR THE NEEDS OF THE
BUSINESS. THE MOST APPROPRIATE USE OF SUCH FUNDS ALSO FORMS A PART OF FINANCIAL
MANAGEMENT.
·
DEFINITION OF FINANCIAL
u
THE SCOPE OF CORPORATION FINANCE IS SO WIDE TO
COVER THE FINANCIAL ACTIVITIES OF A BUSINESS
FROM ITS INCEPTION TO ITS GROWTH AND EXPANSION AND IN SOME CASE WINDING ALSO.
CORPORATION FINANCE DEALS WITH FINANCIAL PLANNING,ACQUISITION OF FUNDS,USE AND
ALLOCATION OF FUNDS AND FINANCIAL CONTROL.
u
HOWARD AND UPTON,” FINANCIAL MANAGEMENT IS THE APPLICATION OF THE
PLANNING AND CONTROL OF THE FINANCE FUNCTION.
u
J.F BRADLEY,” THE AREA OF THE BUSINESS
MANAGEMENT DEVOTED TO JUDICIOUS USE OF CAPITAL AND CAREFUL SELECTION OF
SOURCES OF CAPITAL IN ORDER TO ENABLE A SPENDING UNIT TO MOVE IN THE DIRECTION
OF REACHING ITS GOALS.
Ø
NATURE/FEATURES OF FINANCIAL MGMT
1.
IS AN INTEGRAL PART OF OVERALL MANAGEMENT.
FINANCIAL CONSIDERATIONS ARE INVOLVED IN ALL BUSINESS
2.
FINANCIAL DECISIONS ARE FOCUSING ON
INCREASING/MAXIMIZATION/OPTIMIZATION OF THE VALUE OF THE FIRM
3.
IT ESSENTIALLY INVOLVE RISK RETURN TRADE OFF
DECISIONS ON INVESTMENTS. WHILE INVESTING FINANCIAL MANAGER HAS TO DECIDE THE
LEVEL OF RISK THE FIRM CAN ASSUME AND
EXPECTED RETURN
4.
IT ALSO AFFECT THE SURVIVAL,GROWTH AND
FUNCTIONING OF THE FIRM
5.
FINANCE FUNCTION I.E INVESTMENT,RAISING OF
CAPITAL,DISTRIBUTION OF PROFIT ARE PERFORMED IN ALL FIRMS
6.
HAS TO BE COORDINATED WITH OTHER SYSTEMS
7.
CONTINUOUS PROCESS
Ø
AIM OF FINANCIAL MANAGEMENT
1.
ACQUIRING SUFFICIENT FUNDS
2.
PROPER UTILIZATION OF FUNDS
3.
INCREASING PROFITABILITY
4.
MAXIMIZING FIRM’S VALUE
No comments:
Post a Comment