Meaning of Financial Management

Financial Management 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.
Scope/Elements

1. Investment decisions 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. 2. Financial 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. 3. Dividend decision - The finance manager has to take decision with regards to the net profit distribution. Net profits are generally divided into two:

a. Dividend for shareholders- Dividend and the rate of it has to be decided. b. Retained profits- Amount of retained profits has to be finalized which will depend upon expansion and diversification plans of the enterprise.
Objectives of Financial Management

The financial management is generally concerned with procurement, allocation and control of financial resources of a concern. The objectives can be1. To ensure regular and adequate supply of funds to the concern. 2. To ensure adequate returns to the shareholders which will depend upon the earning capacity, market price of the share, expectations of the shareholders. 3. To ensure optimum funds utilization. Once the funds are procured, they should be utilized in maximum possible way at least cost. 4. To ensure safety on investment, i.e, funds should be invested in safe ventures so that adequate rate of return can be achieved. 5. To plan a sound capital structure-There should be sound and fair composition of capital so that a balance is maintained between debt and equity capital.
Functions of Financial Management

1. Estimation of capital requirements: 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 programmes and policies of a concern. Estimations have to be made in an adequate manner which increases earning capacity of enterprise. 2. Determination of capital composition: 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.

3. Choice of sources of funds: For additional funds to be procured, a company has many choices likea. Issue of shares and debentures b. Loans to be taken from banks and financial institutions c. Public deposits to be drawn like in form of bonds. Choice of factor will depend on relative merits and demerits of each source and period of financing. 4. Investment of funds: The finance manager has to decide to allocate funds into profitable ventures so that there is safety on investment and regular returns is possible. 5. Disposal of surplus: The net profits decision have to be made by the finance manager. This can be done in two ways: a. Dividend declaration - It includes identifying the rate of dividends and other benefits like bonus. b. Retained profits - The volume has to be decided which will depend upon expansional, innovational, diversification plans of the company. 6. Management of cash: 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, maintainance of enough stock, purchase of raw materials, etc. 7. Financial controls: 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.

The essential characteristics of an ideal capital plan may briefly be summarised as follows:(1) Simplicity. The capital plan of a company should be as simple as possible. By 'simplicity' we mean that the plan should be easily understandable to all and it should be free from complications, and/or suspicion-arising statements. At the time of formulating capital structure of a company or issuing various securities to the public, it should be borne in mind that there would be no confusion in the mind of investors about their nature and profitability. (2) Foresight. The planner should always keep in mind not only the needs of 'today' but also the needs of 'tomorrow' so that a sound capital structure (financial plan) may be formed. Capital requirements of a company can be estimated by the scope of operations and it must be planned in such a way that needs for capital may be predicted as accurately as possible. Although, it is difficult to predict the demand of the product yet it cannot b an excuse for the promoters to use foresight to the best advantage in building the capital structure of the company. (3) Flexibility. The capital structure of a company must be flexible enough to meet the capital

retirements of the company. The financial plan should be chalked out in such a way that both increase and decrease in capital may be feasible. The company may require additional capital for financing scheme of modernisation, automation, betterment of employees etc. It is not difficult to increase the capital. It may be done by issuing fresh shares or debentures to the public or raising loans from special financial institutions, but reduction of capital is really a ticklish problem and needs statesman like dexterity. (4) Intensive use. Effective us of capital is as much necessary as its procurement. Every 'paisa' should be used properly for the prosperity of the enterprise. Wasteful use of capital is as bad as inadequate capital. There must be 'fair capitalisation' i.e., company must procure as much capital as requires nothing more and nothing less. Over-capitalisation and under capitalisation are both danger signals. Hence, there should neither be surplus nor deficit capital but procurement of adequate capital should be aimed at and every effort be made to make best use of it. (5) Liquidity. Liquidity means that a reasonable amount of current assets must be kept in the form of liquid cash so that business operations may be carried on smoothly without any shock to therm due to shortage of funds. This cash ratio to current ratio to current assets depends upon a number of factors, e.g., the nature and size of the business, credit standing, goodwill and money market conditions etc. (6) Economy. The cost of capital procurement should always be kept in mind while formulating the financial plan. It should be the minimum possible. Dividend or interests to be paid to share holder (ordinary and preference) should not be a burden to the company in any way. But the cost of capital is not the only criterion, other factors should also be given due importance.

Definition of Financial Management

According to Dr. S. N. Maheshwari,

"Financial management is concerned with raising financial resources and their effective utilisation towards achieving the organisational goals."

According to Richard A. Brealey,

"Financial management is the process of putting the available funds to the best advantage from the long term point of view of business objectives."

Scope of Financial Management

Financial management has a wide scope. According to Dr. S. C. Saxena, the scope of financial management includes the following five 'A's.

1. Anticipation : Financial management estimates the financial needs of the company. That is, it finds out how much finance is required by the company. 2. Acquisition : It collects finance for the company from different sources. 3. Allocation : It uses this collected finance to purchase fixed and current assets for the company. 4. Appropriation : It divides the company's profits among the shareholders, debenture holders, etc. It keeps a part of the profits as reserves. 5. Assessment : It also controls all the financial activities of the company. Financial management is the most important functional area of management. All other functional areas such as production management, marketing management, personnel management, etc. depends on Financial management. Efficient financial management is required for survival, growth and success of the company or firm.

The main objectives of financial management are:1. Profit maximization : The main objective of financial management is profit maximization. The finance manager tries to earn maximum profits for the company in the short-term and the long-term. He cannot guarantee profits in the long term because of business uncertainties. However, a company can earn maximum profits even in the longterm, if:i. The Finance manager takes proper financial decisions. ii. He uses the finance of the company properly. 2. Wealth maximization : Wealth maximization (shareholders' value maximization) is also a main objective of financial management. Wealth maximization means to earn maximum wealth for the shareholders. So, the finance manager tries to give a maximum dividend to the shareholders. He also tries to increase the market value of the shares. The market value of the shares is directly related to the performance of the company. Better the performance, higher is the market value of shares and vice-versa. So, the finance manager must try to maximise shareholder's value. 3. Proper estimation of total financial requirements : Proper estimation of total financial requirements is a very important objective of financial management. The finance manager must estimate the total financial requirements of the company. He must find out how much finance is required to start and run the company. He must find out the fixed capital and working capital requirements of the company. His estimation must be correct. If not, there will be shortage or surplus of finance. Estimating the financial requirements is a very difficult job. The finance manager must consider many factors, such as the type of technology used by company, number of employees employed, scale of operations, legal requirements, etc. 4. Proper mobilisation : Mobilisation (collection) of finance is an important objective of financial management. After estimating the financial requirements, the finance manager must decide about the sources of finance. He can collect finance from many sources such as shares, debentures, bank loans, etc. There must be a proper balance between owned finance and borrowed finance. The company must borrow money at a low rate of interest. 5. Proper utilisation of finance : Proper utilisation of finance is an important objective of financial management. The finance manager must make optimum utilisation of finance. He must use the finance profitable. He must not waste the finance of the company. He must not invest the company's finance in unprofitable projects. He must not block the company's finance in inventories. He must have a short credit period.

6. Maintaining proper cash flow : Maintaining proper cash flow is a short-term objective of financial management. The company must have a proper cash flow to pay the day-today expenses such as purchase of raw materials, payment of wages and salaries, rent, electricity bills, etc. If the company has a good cash flow, it can take advantage of many opportunities such as getting cash discounts on purchases, large-scale purchasing, giving credit to customers, etc. A healthy cash flow improves the chances of survival and success of the company. 7. Survival of company : Survival is the most important objective of financial management. The company must survive in this competitive business world. The finance manager must be very careful while making financial decisions. One wrong decision can make the company sick, and it will close down. 8. Creating reserves : One of the objectives of financial management is to create reserves. The company must not distribute the full profit as a dividend to the shareholders. It must keep a part of it profit as reserves. Reserves can be used for future growth and expansion. It can also be used to face contingencies in the future. 9. Proper coordination : Financial management must try to have proper coordination between the finance department and other departments of the company. 10. Create goodwill : Financial management must try to create goodwill for the company. It must improve the image and reputation of the company. Goodwill helps the company to survive in the short-term and succeed in the long-term. It also helps the company during bad times. 11. Increase efficiency : Financial management also tries to increase the efficiency of all the departments of the company. Proper distribution of finance to all the departments will increase the efficiency of the entire company. 12. Financial discipline : Financial management also tries to create a financial discipline. Financial discipline means:i. To invest finance only in productive areas. This will bring high returns (profits) to the company. ii. To avoid wastage and misuse of finance. 13. Reduce cost of capital : Financial management tries to reduce the cost of capital. That is, it tries to borrow money at a low rate of interest. The finance manager must plan the capital structure in such a way that the cost of capital it minimised. 14. Reduce operating risks : Financial management also tries to reduce the operating risks. There are many risks and uncertainties in a business. The finance manager must take steps to reduce these risks. He must avoid high-risk projects. He must also take proper insurance. 15. Prepare capital structure : Financial management also prepares the capital structure. It decides the ratio between owned finance and borrowed finance. It brings a proper balance between the different sources of. capital. This balance is necessary for liquidity, economy, flexibility and stability.

Functions of Financial Management

Functions of financial management can be broadly divided into two groups.

1. Executive functions of financial management, and 2. Routine functions of financial management.

This division of functions of financial management is depicted below.

Image Credits Sameer Akrani.

Executive Functions of Financial Management

The executive functions of financial management are depicted & listed below.

Eight executive functions of financial management (FM) are:1. Estimating capital requirements : The company must estimate its capital requirements (needs) very carefully. This must be done at the promotion stage. The company must estimate its fixed capital needs and working capital need. If not, the company will become over-capitalized or under-capitalized. 2. Determining capital structure : Capital structure is the ratio between owned capital and borrowed capital. There must be a balance between owned capital and borrowed capital. If the company has too much owned capital, then the shareholders will get fewer dividends. Whereas, if the company has too much of borrowed capital, it has to pay a lot of interest. It also has to repay the borrowed capital after some time. So the finance managers must prepare a balanced capital structure. 3. Estimating cash flow : Cash flow refers to the cash which comes in and the cash which goes out of the business. The cash comes in mostly from sales. The cash goes out for business expenses. So, the finance manager must estimate the future sales of the business. This is called Sales forecasting. He also has to estimate the future business expenses. 4. Investment Decisions : The business gets cash, mainly from sales. It also gets cash from other sources. It gets long-term cash from equity shares, debentures, term loans from financial institutions, etc. It gets short-term loans from banks, fixed deposits, dealer deposits, etc. The finance manager must invest the cash properly. Long-term cash must be used for purchasing fixed assets. Short-term cash must be used as a working capital. 5. Allocation of surplus : Surplus means profits earned by the company. When the company has a surplus, it has three options, viz., 1. It can pay dividend to shareholders. 2. It can save the surplus. That is, it can have retained earnings. 3. It can give bonus to the employees.

6. Deciding Additional finance : Sometimes, a company needs additional finance for modernisation, expansion, diversification, etc. The finance manager has to decide on following questions. 1. When the additional finance will be needed? 2. For how long will this finance be needed? 3. From which sources to collect this finance? 4. How to repay this finance? Additional finance can be collected from shares, debentures, loans from financial institutions, fixed deposits from public, etc. 7. Negotiating for additional finance : The finance manager has to negotiate for additional finance. That is, he has to speak to many bank managers. He has to persuade and convince them to give loans to his company. There are two types of loans, viz., short-term loans and long-term loans. It is easy to get short-term loans from banks. However, it is very difficult to get long-term loans. 8. Checking the financial performance : The finance manager has to check the financial performance of the company. This is a very important finance function. It must be done regularly. This will improve the financial performance of the company. Investors will invest their money in the company only if the financial performance is good. The finance manager must compare the financial performance of the company with the established standards. He must find ways for improving the financial performance of the company.

Routine Functions of Financial Management

The routine functions are also called as incidental functions. Routine functions are clerical functions. They help to perform the Executive functions of financial management. The routine functions of financial management are briefly listed below.

Six routine functions of financial management (FM) are:1. 2. 3. 4. 5. 6. Supervision of cash receipts and payments. Safeguarding of cash balances. Safeguarding of securities, insurance policies and other valuable papers. Taking proper care of mechanical details of financing. Record keeping and reporting. Credit Management.

Financial Planning - Definition, Objectives and Importance

Definition of Financial Planning

Financial Planning is the process of estimating the capital required and determining its competition. It is the process of framing financial policies in relation to procurement, investment and administration of funds of an enterprise.
Objectives of Financial Planning

Financial Planning has got many objectives to look forward to:

a. Determining capital requirements- This will depend upon factors like cost of current and fixed assets, promotional expenses and long- range planning. Capital requirements have to be looked with both aspects: short- term and long- term requirements. b. Determining capital structure- The capital structure is the composition of capital, i.e., the relative kind and proportion of capital required in the business. This includes decisions of debt- equity ratio- both short-term and long- term. c. Framing financial policies with regards to cash control, lending, borrowings, etc. d. A finance manager ensures that the scarce financial resources are maximally utilized in the best possible manner at least cost in order to get maximum returns on investment.
Importance of Financial Planning

Financial Planning is process of framing objectives, policies, procedures, programmes and budgets regarding the financial activities of a concern. This ensures effective and adequate financial and investment policies. The importance can be outlined as1. Adequate funds have to be ensured. 2. Financial Planning helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained. 3. Financial Planning ensures that the suppliers of funds are easily investing in companies which exercise financial planning. 4. Financial Planning helps in making growth and expansion programmes which helps in long-run survival of the company. 5. Financial Planning reduces uncertainties with regards to changing market trends which can be faced easily through enough funds. 6. Financial Planning helps in reducing the uncertainties which can be a hindrance to growth of the company. This helps in ensuring stability an d profitability in concern.

Finance Functions

The following explanation will help in understanding each finance function in detail
Investment Decision

One of the most important finance functions is to intelligently allocate capital to long term assets. This activity is also known as capital budgeting. It is important to allocate capital in those long term assets so as to get maximum yield in future. Following are the two aspects of investment decision a. Evaluation of new investment in terms of profitability b. Comparison of cut off rate against new investment and prevailing investment.

Since the future is uncertain therefore there are difficulties in calculation of expected return. Along with uncertainty comes the risk factor which has to be taken into consideration. This risk factor plays a very significant role in calculating the expected return of the prospective investment. Therefore while considering investment proposal it is important to take into consideration both expected return and the risk involved. Investment decision not only involves allocating capital to long term assets but also involves decisions of using funds which are obtained by selling those assets which become less profitable and less productive. It wise decisions to decompose depreciated assets which are not adding value and utilize those funds in securing other beneficial assets. An opportunity cost of capital needs to be calculating while dissolving such assets. The correct cut off rate is calculated by using this opportunity cost of the required rate of return (RRR)
Financial Decision

Financial decision is yet another important function which a financial manger must perform. It is important to make wise decisions about when, where and how should a business acquire funds. Funds can be acquired through many ways and channels. Broadly speaking a correct ratio of an equity and debt has to be maintained. This mix of equity capital and debt is known as a firms capital structure. A firm tends to benefit most when the market value of a companys share maximizes this not only is a sign of growth for the firm but also maximizes shareholders wealth. On the other hand the use of debt affects the risk and return of a shareholder. It is more risky though it may increase the return on equity funds. A sound financial structure is said to be one which aims at maximizing shareholders return with minimum risk. In such a scenario the market value of the firm will maximize and hence an optimum capital structure would be achieved. Other than equity and debt there are several other tools which are used in deciding a firm capital structure.
Dividend Decision

Earning profit or a positive return is a common aim of all the businesses. But the key function a financial manger performs in case of profitability is to decide whether to distribute all the profits to the shareholder or retain all the profits or distribute part of the profits to the shareholder and retain the other half in the business. Its the financial managers responsibility to decide a optimum dividend policy which maximizes the market value of the firm. Hence an optimum dividend payout ratio is calculated. It is a common practice to pay regular dividends in case of profitability Another way is to issue bonus shares to existing shareholders.
Liquidity Decision

It is very important to maintain a liquidity position of a firm to avoid insolvency. Firms profitability, liquidity and risk all are associated with the investment in current assets. In order to maintain a tradeoff between profitability and liquidity it is important to invest sufficient funds in current assets. But since current assets do not earn anything for business therefore a proper calculation must be done before investing in current assets. Current assets should properly be valued and disposed of from time to time once they become non profitable. Currents assets must be used in times of liquidity problems and times of insolvency.

Role of a Financial Manager

Financial activities of a firm is one of the most important and complex activities of a firm. Therefore in order to take care of these activities a financial manager performs all the requisite financial activities. A financial manger is a person who takes care of all the important financial functions of an organization. The person in charge should maintain a far sightedness in order to ensure that the funds are utilized in the most efficient manner. His actions directly affect the Profitability, growth and goodwill of the firm. Following are the main functions of a Financial Manager:
1. Raising of Funds

In order to meet the obligation of the business it is important to have enough cash and liquidity. A firm can raise funds by the way of equity and debt. It is the responsibility of a financial manager to decide the ratio between debt and equity. It is important to maintain a good balance between equity and debt.
2. Allocation of Funds

Once the funds are raised through different channels the next important function is to allocate the funds. The funds should be allocated in such a manner that they are optimally used. In order to allocate funds in the best possible manner the following point must be considered

The size of the firm and its growth capability Status of assets whether they are long term or short tem Mode by which the funds are raised.

These financial decisions directly and indirectly influence other managerial activities. Hence formation of a good asset mix and proper allocation of funds is one of the most important activity
3. Profit Planning

Profit earning is one of the prime functions of any business organization. Profit earning is important for survival and sustenance of any organization. Profit planning refers to proper usage of the profit generated by the firm. Profit arises due to many factors such as pricing, industry competition, state of the economy, mechanism of demand and supply, cost and output. A healthy mix of variable and fixed factors of production can lead to an increase in the profitability of the firm. Fixed costs are incurred by the use of fixed factors of production such as land and machinery. In order to maintain a tandem it is

important to continuously value the depreciation cost of fixed cost of production. An opportunity cost must be calculated in order to replace those factors of production which has gone thrown wear and tear. If this is not noted then these fixed cost can cause huge fluctuations in profit.
4. Understanding Capital Markets

Shares of a company are traded on stock exchange and there is a continuous sale and purchase of securities. Hence a clear understanding of capital market is an important function of a financial manager. When securities are traded on stock market there involves a huge amount of risk involved. Therefore a financial manger understands and calculates the risk involved in this trading of shares and debentures. Its on the discretion of a financial manager as to how distribute the profits. Many investors do not like the firm to distribute the profits amongst share holders as dividend instead invest in the business itself to enhance growth. The practices of a financial manager directly impact the operation in capital market.

Financial Goal - Profit vs Wealth

Every firm has a predefined goal or an objective. Therefore the most important goal of a financial manager is to increase the owners economic welfare. Here economics welfare may refer to maximization of profit or maximization of shareholders wealth. Therefore Shareholders wealth maximization (SWM) plays a very crucial role as far as financial goals of a firm are concerned. Profit is the remuneration paid to the entrepreneur after deduction of all expenses. Maximization of profit can be defined as maximizing the income of the firm and minimizing the expenditure. The main responsibility of a firm is to carry out business by manufacturing goods and services and selling them in the open market. The mechanism of demand and supply in an open market determine the price of a commodity or a service. A firm can only make profit if it produces a good or delivers a service at a lower cost than what is prevailing in the market. The margin between these two prices would only increase if the firm strives to produce these goods more efficiently and at a lower price without compromising on the quality. The demand and supply mechanism plays a very important role in determining the price of a commodity. A commodity which has a greater demand commands a higher price and hence may result in greater profits. Competition among other suppliers also effect profits. Manufacturers tends to move towards production of those goods which guarantee higher profits. Hence there comes a time when equilibrium is reached and profits are saturated. According to Adam Smith - business man in order to fulfill their profit motive in turn benefits the society as well. It is seen that when a firm tends to increase profit it eventually makes use of its resources in a more effective manner. Profit is regarded as a parameter to measure firms productivity and efficiency. Firms which tend to earn continuous profit eventually improvise their products according to the demand of the consumers. Bulk production

due to massive demand leads to economies of scale which eventually reduces the cost of production. Lower cost of production directly impacts the profit margins. There are two ways to increase the profit margin due to lower cost. Firstly a firm can produce at lower sot but continue to sell at the original price, thereby increasing the revenue. Secondly a firm can reduce the final price offered to the consumer and increase its market thereby superseding its competitors. Both ways the firm will benefit. The second way would increase its sale and market share while the first way only tend to increase its revenue. Profit is an important component of any business. Without profit earning capability it is very difficult to survive in the market. If a firm continues to earn large amount of profits then only it can manage to serve the society in the long run. Therefore profit earning capacity by a firm and public motive in some way goes hand in hand. This eventually also leads to the growth of an economy and increase in National Income due to increasing purchasing power of the consumer.

Profit Maximization Criticisms

Many economists have argued that profit maximization has brought about many disparities among consumers and manufacturers. In case of perfect competition it may appear as a legitimate and a reward for efforts but in case of imperfect competition a firms prime objective should not be profit maximization. In olden times when there was not too much of competition selling and manufacturing goods were primarily for mutual benefit. Manufacturers didnt produce to earn profits rather produced for mutual benefit and social welfare. The aim of the single producer was to retain his position in the market and sustain growth, thereby earning some profit which would help him in maintaining his position. On the other hand in todays time the production system is dominant by two tier system of ownership and management. Ownership aims at maximizing profit and management aims at managing the system of production thereby indirectly increasing the income of the business. These services are used by customers who in turn are forced to pay a higher price due to formation of cartels and monopoly. Not only have the customers suffered but also the employees. Employees are forced to work more than their capacity. they is made to pay in extra hours so that production can increase. Many times manufacturers tend to produce goods which are of no use to the society and create an artificial demand for the product by rigorous marketing and advertising. They tend to make the product so tempting by packaging and labeling that its difficult for the consumer to resist. These happen mainly with products which aim to target kids and teenagers. Ad commercials and print ads tend to provide with wrong information to artificially hike the expectation of the product. In case of oligopoly where the nature of the product is more or less same exploit the customer to the max. Since they form cartels and manipulate prices by giving very less flexibility to the consumer to negotiate or choose from the products available. In such a scenario it is the consumer who becomes prey of these activities. Profit maximization motive is continuously aiming at increasing the firms revenue and is concentrating less on the social welfare.

Government plays a very important role in curbing this practice of charging extraordinary high prices at the cost of service or product. In fact a market which experiences a high degree of competition is likely to exploit the customer in the name of profit maximization, and on the other hand where the production of a particular product or service is limited there is a possibility to charge higher prices is greater. There are few things which need a greater clarification as far as maximization of profit is concerned Profit maximization objective is a little vague in terms of returns achieved by a firm in different time period. The time value of money is often ignored when measuring profit. It leads to uncertainty of returns. Two firms which use same technology and same factors of production may eventually earn different returns. It is due to the profit margin. It may not be legitimate if seen from a different stand point.

We can make the list of these objectives: 1. To Reduce the Misuse of Funds It is the objective of financial management to reduce the misuse of funds. I can take my own example. I hate misusing of my hard earned money. Last month, I have bought DVD writer for starting business of CD and DVD of educational tutorials. But, after spending one month, DVD writer is being used for production or business purposes; I think this is misuse of my fund. If I deposited it in bank, I can earn interest on saving account on daily basis. Like me, company also misuses his funds in bad projects. We should learn from objective of financial management and reduce the misuse of even one rupee. 2. To Maximize the Profit in Long Run If a businessman invests his money and wants to earn high profit, it means, it is taking high risk according to risk theory of financial management. This is not objective of financial management, but to maximize the profit in long run is real aim of financial management. 3. To Maximize the Wealth of Company An investor only purchases shares, if he hopes that he will earn high profit on it, otherwise, he can deposit his money in saving account of bank. So, it is the objective of financial management to maximize the value of share. It can be possible by following way. a) To Increase Dividend per share b) To Increase Earning per share c) To Analyze the value of share in market 4. To Fulfill the Social Responsibility

Company uses the natural resources and earns money and funds. Suppose Xyz Company started a plant in F place and use water, land and machines, it earned 10 million dollars from that plant. According to my view, Xyz Company takes his all natural resources from society in the form of land, water, metal and minerals. God has made these things for whole society not a particular Xyz company. If Xyz Company has used these resources, then it is the duty of xyz Company to fulfill his responsibility toward society. This is the main objective of financial management. Companys reputation can be calculated with how many employees are working in it. What facilities are given by company to his employees? If company only shows his balance sheet of dead plants, machinery and other assets but there is not provision of any social activity or donation, that company will not get any goodwill. Some companies are being operated on the basis of public deposits instead of share capital. Why? And answer is security and that company can give only the security who wants to benefit of society like a social worker. Ok

Financial Management can be defined as: The management of the finances of a business / organisation in order to achieve financial objectives Taking a commercial business as the most common organisational structure, the key objectives of financial management would be to: Create wealth for the business Generate cash, and Provide an adequate return on investment bearing in mind the risks that the business is taking and the resources invested There are three key elements to the process of financial management: (1) Financial Planning Management need to ensure that enough funding is available at the right time to meet the needs of the business. In the short term, funding may be needed to invest in equipment and stocks, pay employees and fund sales made on credit. In the medium and long term, funding may be required for significant additions to the productive capacity of the business or to make acquisitions. (2) Financial Control Financial control is a critically important activity to help the business ensure that the business is meeting its objectives. Financial control addresses questions such as:

 Are assets being used efficiently? Are the businesses assets secure? Do management act in the best interest of shareholders and in accordance with business rules? (3) Financial Decision-making The key aspects of financial decision-making relate to investment, financing and dividends: Investments must be financed in some way however there are always financing alternatives that can be considered. For example it is possible to raise finance from selling new shares, borrowing from banks or taking credit from suppliers A key financing decision is whether profits earned by the business should be retained rather than distributed to shareholders via dividends. If dividends are too high, the business may be starved of funding to reinvest in growing revenues and profits further.

Explain the objectives, functions,roles of a Finance Manager

The main objective of the Finance Manager is to manage funds in such a way so as to ensure their optimum utilization and their procurement in a manner that the risk, cost and control considerations are properly balanced in a given situation. To achieve the objective the Finance Manager performs the following functions in the following areas:Forecasting and Planning The need to estimate/forecast the requirement of funds for both the short term(working capital requirements) and the long term purpose(capital investments). Forecasting the requirements of funds involves the use of budgetary control and long-range planning

Financing Decision Helps to decide what type of Capital structure the company needs to have re: whether these funds would be raised re: from loans/borrowings or from internal source(share capital)

To raise sufficient long term funds to finance fixed assets and other long term investments and to provide for the needs of working capital

Investment Decision In projects using the various capital budgeting tools like Payback method, accounting rate of return, internal rate of return, net present value. Assets management policies are to be laid down regarding the various items of current assets like accounts receivable by coordinating with the sales personnel, inventory with production

Dividend Decision Taking into consideration, earnings trend, share market price trend, fund requirement for future growth, cash flow situation and others.

Financial negotiation Plays a very important role in carrying out negotiations with the various financial institutions, banks and public depositors for raising funds on favourable terms

Cash Management The finance manager needs to ensure the supply of adequate, timely and cheap fund to the various parts of the organization That there is no excessive cash idling around

Evaluating financial performance To need to constantly review the financial performance of the various units of organization generally in terms of ROI(return on investment. Such review assists management in seeing ow the funds have been utilized in the various divisions and what can be done to improve it.

Dealing with relevant parties in the Financial Markets Where the company is a listed entity, the need to interact with the Stock Exchange

To deal with money markets and capital markets for financing or investment of idling funds To foster relationships with bankers, investors, underwriters of equity and bond issuances and other government regulatory bodies.

What Is The Nature Of Financial Management?

Financial Management is an important field of Management Sciences. It is a combination of Managerial Finance and Corporate Finance. Managerial Finance concerns with the managerial use of financial techniques. Whereas on the other hand, Corporate finance deals with corporate financial decisions. In both the cases, it is extremely important for Managers in an organization. Financial Management is used to determine the best way to use the money available to an organization in order to improve the future opportunities to earn money. Thus the financial managers use techniques such as Valuation, Portfolio management, Hedging and capital structure etc for better decisions about the future of an organization. On the other hand, it is also used to interpret financial results in a given year or time period using financial analysis techniques. This helps in judging the actual performance of an organization in that time period. Financial management helps in proper allocation of costs, anticipate future expense, and budgeting for the future.s