ASSIGNMENT

M.B.A 1ST YEAR

2ND SEMESTER
BATCH: 2020-2021

Subject:- Financial Management

Subject code:- 2813

Submitted by: Submitted to:

Hyder Imam Ms. Karishma Aggarwal

FACULTY OF MANAGEMENT AND COMMERCE

SBS College, Chandigarh Road Ludhiana
 Note : Attempt all the questions and submit this assignment on or
before 10-07-2021.

Q1- Meaning and objectives of financial management?

Q2- How Financial Management is responsible for the growth and profitability of an
organization.

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Q1- Meaning and objectives of financial management?

Ans:- Meaning of Financial Management

Financial Management is critical to any company, whether small or big. It is like the lifeline of the business.
It is also a vital activity that must be performed in any organization.

However, financial management entails the process of planning, organizing, monitoring, and also controlling
the financial resources of an organization. The idea for doing such is to be able to achieve the vision or goals
of the company at the stipulated time frame.

Financial Management is a regular practice in a business environment. It involves managing a company’s

financial resources to ensure there is little or no wastage.

It controls every single thing regarding the company’s financial activities which includes the procurement of
funds, use of funds, payments, accounting, risk assessment, and other things that are related to finances.

And that is one of the reasons it is considered to be an integral part of the company because, without proper
use of funds, the business can go down. It might also not have what it takes to carry out production or
activities.

The general principles of management are also applied to the financial management of the company too. But
the main focus shouldn’t be to create principles or department to manage the finances of the business.

They must be set up to follow the best practices, use the required financial management tools, and also
deploy the right strategies to minimize cost, and ensure production or business activities function smoothly.

In other words, the use of business funds matters. It’s the reason financial management is like the engine
room of the company and can affect every other department if not handled properly.

So in order to eliminate any form of barrier that may hinder the growth of the business, firms must ensure
that the right financial management mechanism is put in place.

Scope/Elements

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.

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.

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

Dividend for shareholders- Dividend and the rate of it has to be decided.

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

There are objectives or reasons firms implement these management strategies

to grow their business.

1. Profit Maximization

One of the reasons a company employs a financial manager is to maximize profit while managing the finance
of the company.

The gain can be in the short or long-term. But the main focus is that the individual or department handling
the financial issues of the company must ensure that the company in question is making sufficient profit.

2. Proper Mobilization of Finance

The collection of funds to run the business is also an integral part of financial management that the manager
needs to handle appropriately.

Once the manager concludes the estimation of the amount needed for a business process, the required
amount can then be requested from any legal sources such as debenture, shares, or even request for a bank
loan. But the point is that there should be a proper balance between the money the firm has and the amount
borrowed.

3. The Company’s Survival

The survival of the company is essential. That is one of the reasons the management considers hiring
financial managers in the first place. The manager has to make adequate financial decisions to ensure the
company is successful.

4. Proper Coordination

There must be a proper understanding and corporation among the various departments. The finance
department must understand and agree with other departments within the company for the business to
function smoothly.

5. Lowers Cost of Capital

Financial managers also try their very best to reduce the cost of capital, which is something that is vital to the
business. They ensure money borrowed attracts little interest rates so the company can maximize profit.

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Q2- How Financial Management is responsible for the growth and profitability of an organization.

Ans:- Financial management may be defined as the area or function in an organization which is concerned

with profitability, expenses, cash and credit, so that the "organization may have the ... the Capital Structure:
Capital structure is how a firm finances its overall operations and growth by using different sources of funds.

8 Major Roles and Functions of Financial Management

Financial Decisions and control

Financial planning

Capital management

Allocation and utilization of financial resources

Cash flow management

Disposal of surplus

Financial reporting

Risk Management

Finance is an essential and indispensable part of any organization. It is difficult for organizations, whether
profit-making or otherwise, to sustain themselves for long without proper finances. Not just that, the efficient
management of these financial resources is essential to be sustainable and viable in the long-run. 
 

Financial management helps organizations to do so. Financial management refers to the effective and
efficient planning, organizing, directing and controlling the financial activities and processes of an
organization. This includes but is not limited to fund procurement, allocation of financial resources,
utilization of funds, etc.

Considering the importance of the finance function in organizations, the demand for professionals with these
skills has always been steady. Today, it is possible for even non-finance professionals and entrepreneurs to
learn finance concepts through a certified financial analyst course.

Financial decisions and controls: 

Financial management and financial managers play a crucial role in making financial decisions and
exercising control over finances in the organization. They make use of techniques like ratio analysis,
financial forecasting, profit and loss analysis, etc.

Financial Planning:

The finance managers are responsible for the planning of financial activities and resources in the
organization. To this end, they use available data to understand the needs and priorities of the organization as
well as the overall economic situation and make plans and budgets for the same.

Capital Management:

It is the responsibility of financial management to estimate the capital requirements of the organization from
time to time, determines the capital structure and composition and makes the choice of source of funding for
the capital needs.

Allocation and Utilization of financial resources:

Financial management ensures that all financial resources of the organizations are used and invested
effectively and efficiently so that the organization is profitable, sustainable and viable in the long-run.

Cash Flow Management:

It is extremely important for organizations to have sufficient working capital and cash flow to meet their
operational expenses and emergencies. Financial management tracks account payable and receivable to
ensure there is sufficient cash flow available at all times.

Disposal of Surplus:

The decisions on how the surplus or profits of the organizations is utilized is taken by the financial managers
of the organizations. They decide if dividends should be distributed and how much as well as the proportion
of profits that must be retained and ploughed back into the business.

Financial Reporting:

Financial management maintains all necessary reports related to the finance of the organization and uses this
as the database for forecasting and planning financial activities.

Risk Management:

Sound financial management prepares the organization to forecast risks, put in place mitigation plans as well
as to meet unforeseen risks and emergencies effectively.

Enrol yourself in a short term course in finance for working professionals and equip yourself with the skills
required to efficiently manage the finances of your organization.

A financial management online certification is a prerequisite for most jobs in the financial industry, but what
if you don’t possess one and want to work in this domain? Whilst it is more grueling for someone with a
non-finance degree to secure a job in finance, there is still hope.

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