Means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise.

Includes investment in fixed assets (called as capital budgeting). Investment in current assets are also a part of investment decisions called as working capital decisions.

They relate to the raising of finance from various resources which will depend upon decision on type of source, period of financing, cost of financing and the returns thereby.

The finance manager has to take decision with regards to the net profit distribution.

Dividend and the rate of it has to be decided.

Amount of ___ has to be finalized which will depend upon expansion and diversification plans of the enterprise.

Scope of Financial Management

Net profits are generally divided into two:

Involves the prudent allotment and spreading of company funds to current assets and non-current assets. The general functions are carried on a daily basis like cash management, inventory management, credit management and fund receipt, and disbursement management. Other activities not on a daily basis include company stock and bond issuance, capital budgeting, and creating dividend policies.

Functions of Financial Management

A finance manager has to make estimation with regards to capital requirements of the company. This will depend upon expected costs and profits and future programs and policies of a concern. Estimations have to be made in an adequate manner which increases earning capacity of enterprise.

Once the estimation have been made, the capital structure have to be decided. This involves short- term and long- term debt equity analysis. This will depend upon the proportion of equity capital a company is possessing and additional funds which have to be raised from outside parties.

For additional funds to be procured, a company has many choices such as: Issue of shares and debentures; Loans to be taken from banks and financial institutions; and Public deposits to be drawn like in form of bonds.

The finance manager has to decide to allocate funds into profitable ventures so that there is safety on investment and regular returns is possible.

The net profits decision have to be made by the finance manager.

Finance manager has to make decisions with regards to cash management. Cash is required for many purposes like payment of wages and salaries, payment of electricity and water bills, payment to creditors, meeting current liabilities, maintenance of enough stock, purchase of raw materials, etc.

The finance manager has not only to plan, procure and utilize the funds but he also has to exercise control over finances. This can be done through many techniques like ratio analysis, financial forecasting, cost and profit control, etc.

It includes identifying the rate of dividends and other benefits like bonus.

The volume has to be decided which will depend upon expansions, innovation, diversification plans of the company.

Goals of Financial Management

The objective of financial management is to earn maximum profits. Various important decisions are taken to maximize the profit of the firm. ___ as an objective of financial management results in efficient allocation of resources. Companies collect their finance by issuing shares to the public. Investors also purchase shares in hope of getting good returns from the company in the form of dividend. If the company does not earn good profits and fails to distribute higher dividends, the people would not invest in such a company and people who have already invested will sell their stock.

The objective of ___ of shareholders considers all future cash flows, dividends, earning per share, risk of a decision, etc. This goal directly affects the policy decision of the firm about what to invest in and how to finance these investments. Shareholders are always interested in maximization of wealth which depends upon the market price of the shares. Increase in market price lead to appreciation in shareholder's wealth and vice versa. So the major goal of financial management is to maximize the market price of the equity shares of the company.

The third objective of financial management says to safeguard the economic interest of all the persons who are directly or indirectly connected with the company whether they are shareholders,creditors or employees. All these parties must also get maximum return on the investment and this can be possible only when the company earns higher profits to discharge its obligations to them.