Financial Management and

Objectives of Financial Management

 Financial Management

According to B.O.Wheeler: “Financial Management

includes those business activities that are concerned with
acquisition and conservation of capital funds in meeting the
financial needs and overall objectives of a business
enterprise.”
Proper financial management will help firms to supply
better product to its customers at lower prices, a pay higher
salary to its employees and still provide a greater return to
investors.
Objectives of Financial Management

1. Wealth Maximization
One of the main objectives of Financial Management is to maximize
shareholder’s wealth, for which achievement of optimum capital structure
and proper utilization of funds is very necessary. Be mindful that wealth
maximization is different than profit maximization. Wealth maximization
is a more holistic approach, aimed at the growth of the organization

2. To Ensure Availability of Funds

The sound financial condition of business is a must for any business to
survive. The availability of funds at the proper time of need is an
important objective of business. The organization will not be able to
function without funds, and activities will come to a halt.
 Objectives of Financial Management
3. Attain Optimum Capital Structure
To maintain the optimum capital structure, a perfect combination
of debentures and shares is a requirement. The organization will not want to give
away too much equity, and also control the cost of capital. It is a delicate balance.
4. Effective Utilization of Funds
Business not only needs a large number of funds but also skills to handle such
large amounts. To cut down unnecessary costs and to save funds from wasting in
useless assets is crucial for business. An example of such misuse of funds would be
investing in extra raw material, in quantities not required.
5. Ensuring the Safety of Funds
The vital objective of financial management is to ensure the security of its funds
through the creation of reserves. The chances of risk in investment should be
minimum possible. Some of the reserves created for this purpose are Sinking Funds,
General Reserves etc
 Solved Question for You

Question: Explain Financial Management. What is effective

utilization of funds?

Answer: Funds required for carrying out business operations is

called Business Finance. Finance is a need to set up a business, to run
it, to modernize, it to expand or diversify it. The activities concerned
with the planning, raising controlling and administering money used in
the business is Financial Management.

Effective utilization of funds means to cut down unnecessary costs and

to save funds from wasting on useless assets.