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IMPORTANCE OF FINANCIAL MANAGEMENT

Finance is an integral part of everyone’s life and

financial principles are based on pure and simple common

sense. The ability to take financially intelligent decisions

is financial management. It is the ability to understand the

impact of every decision on net worth or economic position

and to ensure that all the actions should be taken to

strengthen economic position and do nothing that weakens it.

On the other hand, financial decision making requires the

abilities to reason, retrieve information and perform

quantitative tasks regarding money (Tannahill, 2012). It is

the ability to make informed judgments regarding the use and

management of money and wealth (Gale & Levine, 2010; Holden,

Charles, Laura, Deanna & Beatriz, 2009). Those who are more

financially knowledgeable are much more likely to have

planned (Lusardi, 2008).

Finance consists of three interrelated areas. First,

money and capital market, which deals with securities market

and financial institutions; second, investment, which

focuses on the decision made by both individual and

institutional investors as they select securities for their

investment portfolios and thirdly, financial management or

business finance which involves decisions within the firm.

Among these three, financial management is the broadest of

all (Wilson, 2015).

Financial management has been defined as, the

administrative function in an organization which have to do

with the management of flow of cash, - so that the

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organization will have the means to carry out its objectives

as satisfactorily as possible and at the same time, ‘meet

its obligations as they become due. But the modern school

defined finance as, "an activity concerned with planning,

raising, controlling and administering of funds used in

business". It basically deals with the application of

principles developed by the financial managers and those

borrowed from accounting, economics and other fields to the

task. As an effective management and as a 'cash' in this

context, it is proper to mention J. Hampton, het applies to

any activity of an organization, which has financial

implications. Finance is inextricably interwoven with other

financial areas of administration, viz., production,

marketing and accounting, and it is as important as any

other area.

Ezra Solomon^ defines the scope of financial management

in terms of the following questions:

How large should the firm be and how fast should it

grow? What should be the composition of the firm's

assets? What should be the composition of the firm's

financing?

Answers to the above questions are obtained by the

managers in the theory of financial management.

Financial management is the act of identifying where to

acquire long-term finance and how to manage everyday

financial activities in the business environment. In simple

terms, business finance is seen as the business function of

planning, obtaining and managing the firm’s funds to

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accomplish its objectives in the most effective possible

way.

Peterson (1984) states that financial management is

“the management of cash flow of a firm to make profit for

its owners.” She further explains that a firm may be a

business enterprise such as manufacturing company,

accounting firm, credit union, an oil production firm or a

charitable organization.

With respect to the above authorities, the researcher

can also deduce that financial management is the management

of cash and how monies allocated to various department of

organisation are accounted for. This ensures that owners of

the organisation get a true view of the operations and

management of the business.

RESEARCH IN WORKING CAPITAL

Working capital management is the area of financial

management in which a great deal of studies have been

conducted. John 00 Sagan (1955) indicated the need to build

up a Theory of Working.

Capital and emphasis was laid on cash management. 62 A

detailed study of N.K. Agarwal (1983) on the management of

working capital in selected undertakings in the private

sector in India, further Dr. K. Rajeshwarrao (1985) made a

study on working capital planning and control in public

enterprises in India. Most of these studies have thrown

light on the aspects of controlling measures, followed in

the respective sectors and their differences have been

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highlighted. We should be financial literate to avoid

instability of money.

Bardia (1987) in his article on working capital

management exposed the importance of working capital

management as an index of corporate performance, which

arises from the fact that while inadequacy of profit may

cause sickness, a serious liquidity problem would lead to

closure of the units. V.E. Ram Moorthy (1976) in his study

came with various techniques and tools useful for evaluating

efficient working capital management.

FINANCIAL INTELLIGENCE ENHANCES EFFECTIVENESS OF FINANCIAL

DECISIONS

Financial intelligence is the gathering of information

of financial relevance, to understand its effect and

interpretations, and predict its behavior and outcomes. It

helps in improving decision-making skills and boost control

over finances (Berman, Knight, & Case, 2006). In other

words, financial literacy can have positive effects on

financial behaviour. Increased financial literacy could help

individuals understand their saving situations better, save

more, and attain higher economic status and more economic

security (Lusardi et al., 2009; Barcus, 2011). Financial

education also is the process by which people improve their

understanding of financial products, services and concepts

so they are empowered to make informed choices, avoid

pitfalls, know where to go and act to improve their present

and long term financial well-being. Financial intelligence

helps to understand and use financial information. It helps

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you to be practical in your everyday life. If you earned

some from your allowance as a student, do not use it to buy

unnecessary things for you to be belong in your groups

instead, earn and invest for more return to come. Learn

financial intelligence to earn more. Financial intelligence

shows them how to use the information to work and manage

more effectively (Malagoli, Giovanni, & Magni, 2005). The

key to success is education (Kiyasaki, 2008).

Money is an arm or a leg; you either use it or lose it.

-Henry Ford^

This statement is quite meaningful. It brings home the

significance of money, or finance, which compotes, "the

finance is the lifeblood of business". It guides investment

and expenditure and endeavours to squeeze the most out of

every available Rupee. No business activity can ever be

pursued without financial support and for survival in the

market, financial viability is the central theme of any

business proposition. In our experience during the work

immersion process, it is true that finance is the life blood

of the business. If you don’t know how to handle it well,

you will lose as a blink of an eye. The concept in financial

management can help each of us to be financial literate or

use our finance practically and effectively.

Conveniently raising of funds and allocation of funds

became two important branches of financial management and

for their better nourishment, were looked after by different

individuals in small, medium and large enterprises

(Anonymous, N.d.)

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The recognition of the importance of financial planning

means creating and evaluating financial statements for

financial wellbeing. The financial information of an

individual is contained in financial statements. Three basic

financial statements that are of great significance are

balance sheet, profit & loss account and cash flow statement

(Warschauer & Sciglimpaglia, 2012).

Finance has its own theories and principles,< but it is

fundamentally concerned with applications.

Financial management has an impact on all the

activities of a firm, its significance cannot be

underestimated. Efficient financial management is a must for

any organization, irrespective of its size, nature of

ownership, control and whether it is a private sector,

public sector or a cooperative organization and

manufacturing or service organization. In the words of

Kiyasaki (2008), the one reason people lack this financial

intelligence is they want money but not the process. It is

the process that makes them rich not the money. Many people

fail to become rich because they don’t value the steady

process of becoming financially smarter and richer.

Efficient financial management stimulates growth of the

organization and contributions to national progress;

therefore, it can be considered as a key-determinant of any

business organization.

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