Functions of Financial Management

Finance functions are carried on to achieve the objective

of the firm. There are mainly two approaches to express
the "Financial Function". The first approach relates it to
the collection of funds. The second approach relates
finance functions to the procurements of funds and their
effective utilization. The first ignores the uses of funds it
was. It was major finance function at the early stage of
the development of finance. The second is
comprehensive and universally accepted; we are
following the Second One.
Finance Functions
1) Executive Finance Functions

Investment Decision
Financial Decision
Dividend Decision
Working Capital Decision

2) Routine Finance Function

Supervision of Cash Receipts and Disbursements
Safeguarding of Cash Balances
Custody and Safeguarding of Valuable Documents
(Like Securities and Polices)
Taking Care of Mechanical details of Financing
Record keeping of financial Performance of the Firm
Reporting the Top Management
Supervision of Fixed Assets and Current Assets

1) Executive Finance Functions

Executive finance functions are those functions that
require managerial skills in their planning, execution and
control. Since these functions require greater managerial
ability, they are also known as managerial functions.
The executive finance functions are explained here:
Investment Decision
It refers to acceptance/ rejection of long-term investment
proposal. Proposal related to acquisition, modification and
replacement of assets are long-term investment proposal.
Long-term refers to the time horizon of more than one
year. The long term assets like plants, machines,
equipments, land, buildings etc
Financing Decision
It is concerned with the collection of the fund. The
financial manager needs to decide about the appropriate
amount and sources of the fund.
Dividend Decision
The net income after paying preference dividend belongs
to the equity shareholders. However, there is no legal
obligation to pay dividend to the equity shareholders. The
dividend decision is the allocation of net profit after tax
and preference dividend to equity shareholders.
Working Capital Decision

Working capital decision refers to the commitment of

funds to current such as inventory, bills receivable, cash
balance, prepaid, etc. this decision is known as current
assets management also..
2) Routine Finance Function
It is also the incidental finance function, which is
performed to execute the executive finance effectively.
Routine finance function does not require specialized
skills of finance. They are of clerical nature. So they are
called clerical finance function too. These function cover
procedures and system and involve a lot of paper work
and time, some of them are below:

Supervision for cash receipts and disbursements

Safeguarding of cash balances
Custody and safeguarding of valuable documents like
securities and insurance policies
Taking care of mechanical details of financing
Record keeping of the financial performance of the
firm
Reporting to the top management
Supervision of fixed assets and current assets.