Financial ManagementManagement Definition
: "Coordinating work activities so that they arecompleted efficiently and effectively with and through other people"(Robbins & Coulter, 2006)
Basically five functions of management were proposed by aFrench industrialist named Henri Fayol but now condensed to four functions:namely: Planning, Organizing, Leading, Controlling.
“The process of procurement of funds and the efficient and wiseallocation and use of the funds and resources".
Nature of Financial Management
The term nature refers to its
relationship with the closely related fields of economics and accounting
Relationship with the fields of Economics and AccountingFinance and EconomicsMacro Economics:
Overall institutional environment in which a firmoperates. It looks at the economy as a whole.Financial managers should understand the economic environment,specifically:
Recognize and understand how monetary policy affects the cost andavailability of funds
Be versed in fiscal policy and its effects on the economy
Be aware of the various financial institutions and
Understand consequences of various levels of economic activity andchanges in economic policy for their decision environment and so on.
Economic decisions of individuals and organizations.The concepts and theories relevant to financial management are:
Supply and demand relationships and profit maximization strategies.
Issues related to the mix of productive factors, optimal sales level and product pricing strategies.
Measurement of utility preference, risk and the determination of value
The rationale of depreciating assets.
Comparison of marginal revenue and marginal cost.