FINANCIAL

MANAGEMENT
NATURE, SCOPE AND PURPOSE
ELMER TENA
Professor
 WHAT IS 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.
 NATURE OF
FINANCIAL
MANAGEMENT
Ivy I. Amoroso
T-1 Baras Elem. Sch
Reporter
 ESTIMATES CAPITAL REQUIREMENTS

• Financial management helps in anticipation of

funds by estimating working capital and fixed
capital requirements for carrying business
activities.
 DECIDES CAPITAL STRUCTURE

• Proper balance between debt and equity should be

attained, which minimizes the cost of capital.
• Financial management decides proper portion of
different securities (common equity, preferred equity
and debt).
 SELECT SOURCE OF FUN

• Source of fund is one crucial decision in every

organization. Every organization should properly
analyze various source of funds (shares, bonds,
debentures etc.) and must select appropriate funds which
involves minimal risk.
 SELECTS INVESTMENT PATTERN

• Before investing the amount, the investment

proposal should be analysed and properly
evaluates its risk and returns.
 RAISES SHAREHOLDERS VALUE

• It aims to increase the amount of return to its

shareholders by decreasing its cost of operations and
increase in profits.
• Finance manager should focus on raising the funds from
different sources and invest them in profitable avenues.
 MANAGEMENT OF CASH

• Finance manager observes all cash movements

(inflow and outflow) and ensures they should face
any deficiency or surplus of cash.
 APPLY FINANCIAL CONTROLS

• Implying financial controls helps in keeping the company

actual cost of operation within limits and earning the expected
profits.
• There different approaches involved like developing certain
standards for business in advance, comparing the actual cost or
performances with pre-established standards and taking all
require remedial measures.
 SCOPE OF
FINANCIAL
MANAGEMEN
T
Ma. Cristina D. Conejos
Cindy D. Sales
T-2 Baras Elem. Sch.
T-1 Baras Elem. Sch
Reporter
Reporter
• Financial management covers wide area with
multidimensional approaches. It plays an
important role in overall management by dealing
with various functional departments like
personnel, marketing and production.
• The scope of financial management is explained
below −
• Financial management in a company is governed by the
principle that it must protect the financial interests of the
investors, shareholders, and ensure business growth. Apart
from securing their interests, financial managers are also
expected to ensure greater ROI that generates more wealth
for all shareholders. There are certain objectives of
financial management which are universally accepted by
experts and business leaders, and these clearly outline the
financial management scope and functions.
 SCOPE/ELEMENTS OF FINANCIAL
MANAGEMENT

• 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.
 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.
 FINANCIAL MANAGEMENT AND ECONOMICS
• Financial economics is one of the emerging area, which
provides immense opportunities to finance and economical
areas.
• Using macro and micro economics concepts for financial
management approach.
• Financial managers use investment decisions, micro and
macro environmental factors, money value discount factor,
economic order quantity etc.
 FINANCIAL MANAGEMENT AND ACCOUNTING

• In olden days, both financial management and

accounting treated as same and merged, but
now-adays, both are separated and
interrelated.
 FINANCIAL MANAGEMENT AND
MATHEMATICS

• Latest approach of the financial management

applied large number of mathematical and
statistical tools and techniques called
econometrics.
 FINANCIAL MANAGEMENT AND PRODUCTION
MANAGEMENT

• Production performances need finance, because the

expenses of production (raw material, machinery
wages, operating expenses etc.) are carried out by
finance department and appropriate funds are
allotted to each stage of production.
 FINANCIAL MANAGEMENT
AND MARKETING
• The finance manager or department is
responsible to allocate the adequate funds to
marketing department by which goods will be
sold by innovative and modern approaches.
 FINANCIAL MANAGEMENT AND HUMAN
RESOURCES

• Financial manager should carefully evaluate the

requirement of manpower in respective
departments and allocates finance to human
resource department in the form of wages, salary,
bonus and other monetary benefits.
PURPOSE OF
FINANCIAL
MANAGEMEN
TJanet N. Salcedo
T-1 Baras Elem. Sch
Reporter
• The purpose of financial management is to guide
businesses or individuals on financial decisions
that affect financial stability both now and in the
future. To provide good guidance, financial
management professionals will analyze finances
and investments along with many other forms of
financial data to help clients make decisions that
align with goals. 
• Financial management can also offer clients
increased financial stability and profitability when
there’s a strategic plan for where, why, and how
finances are allocated and used. How financial
management professionals help clients reach goals
will depend on whether the client is a company or
an individual.
IMPORTANCE OF
FINANCIAL
MANAGEMENT
• The financial management of an organization determines the
objectives, formulates the policies, lays out the procedures,
implements the programs, and allocates the budgets related
to all financial activities of a business. Through a
streamlined financial management practice, it is possible to
ensure that there are sufficient funds available for the
company at any stage of its operations.
THANK
YOU!