Scope and Functions of Financial Management Help

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What is Financial Management?

 
The general management of the finances of an enterprise is financial management. It may mean and include directing, planning and disturbing the financial resources of an enterprise.
 

What are the Scopes of Financial Management?

 
• Investment may mean investment in fixed or movable assets.
• Investment in fixed assets means and includes planning in long term goals of an enterprise.
• Investment in movable are aimed towards meeting the day to day objectives of an enterprise such as working capital requirements, etc.
 

• Financial management also envisages procurement of money such as equity, borrowings, etc.
• Management of finance also envisions distribution of money among the shareholders, investors.
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What are the Functions of Financial Management?

 
• It must be determined firstly as to how much capital is actually needed. Once that is figured, you have to find means for procurement of capital. It seeks an equitable distribution between equity and debt instruments. Debt brings with itself a plethora of options of finance. Once also needs to figure out the cost of obtaining capital and its overall impact on the final objectives of an enterprise.
 
• An important aspect of financial management is debt equity analysis. How much is actually required by way of promoter’s contribution and how much by way of borrowings is an actual call to be taken by the enterprise. Debt brings with it options such as bank borrowings, venture capital funds, hedge funds, bonds, etc.
 
• Investments of funds acquired and its allocation is an important factor for effective financial management. To determine as to how much is actually needed immediately and how much within the reasonable foreseeable future is a call to be taken.
 
• Surplus, if any, shall be reasonably and equitably managed. It envisages a situation for dividend declaration and upkeep for surplus, if any. It shows that the long term objectives of an enterprise are met.
• Another most important aspect of financial management is cost control. Don’t buy what do don’t need. Only spend what is required. This does not mean being miserly but financially prudent. It will ensure that the financial resources of the company are being spent wisely.
 
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