Background of the study

The financial function has always been important in business management. Irrespective of

differences in structure, ownership and size, the financial organization of the enterprise ought

to be capable of ensuring that the various finance functions: budgeting and controlling are

carried out with the highest degree of efficiency. The profitability of any business depends

largely upon the manner the financial functions are performed and related to other business

function.

When talking of the capital market, its operations within the economy cannot be over

emphasized. Thus, the demand for and supply of funds for business organizations, become a

fundamental management function. Therefore, financial management play an important role

both in increasing operational efficiency within the firm and allocating funds to productive or

investable sector within and outside the organization.

These functions can only be achieved when there is proper planning and controlling,

coordinating and other elements of management combined effectively with the finance

function.

The role of the financial management is to create a system of managerial reports in order to

efficiently develop the business. In the economy of the future, the intelligent company will

put an end to the principle according to which a higher profit incurs a higher risk, as the

efficient management will reduce the risk to a great extent, by influencing the conditional

environmental factors.

Entrepreneurs and managers consider the financial management very important as it is

strongly connected with the business controllable development and maximizing the profit.

Economic analysis and financial diagnosis identify the “areas” in which the firm wins or

loses money.
A modern entrepreneur must be acquainted with the news of his area, must be up to date with

the specialized knowledge, and must be able to reflect these in the decision-making process,

considering the modern evolutions. He also has to be very clear and precise in denominating

the principles and operational alternatives, he has to corroborate the set objectives and the

paths for achievement, he must respect the opinions and individuality of the human resources

he cooperates with, and to consider the positive elements coming from them.

The managers of the future firms will be relatively young but will have a solid background of

operational and business experience and will benefit from a highly logistic support from

training in specialized institutions in the country and abroad. Their concern for competence

will be highly interleaved with their activities which will lead to remarkable performances.

Problem statement

Financial management is a feature, which govern the whole process of organizational

management. Emphasis is often on planning and control used within an organization to

strengthen area of potential weakness or to capitalize on more effective opportunity for the

business.

All organizations, be it public or private need financing to attain better positions. Hence, the

problems of financing all business may include: High Cost of capital. Since the acquisition of

capital by business usually attract high financial interest rates these exposes them to risk and

the unsatisfactory profits is another phenomenon which hinder small business from paying

back.

Deficiencies in financial management are another problem encountered by

business as managers or owners lack experience in financial management. Only possess pool

of expertise in production and sales. Also is the weakness in financial planning as they are