Financial Management : Importance and Objectives

Robert Smith Finance

Consultant

Contents

Introduction

Importance of Financial Management

Objectives of Financial Management

Conclusion

Introduction

It is the art and science of managing money. It is the duties of financial managers in a business firm.

Financial management is all about obtaining funds and how to use that fund.

Financial Management is a careful selection of the source of working capital.

It includes financial planning, financial administration and financial control.

Importance of Financial Management

Development and Economic Growth

Improved Standard of Living

Improved Health

Contd..

Creates Job

Alleviation of Poverty

Better Financial Decisions

Objectives of Financial Management

Two main objectives of financial management are: 1. Profit Maximization 2. Wealth Maximization

It provides a framework for optimum financial decision

making.

It operates internal investment and financing of the firm.

Contd..Profit Maximization

Profit/EPS maximization should be taken and those that decrease profit/EPS should be avoided.

It deals with the allocation of resources. Here resources are working capital for business funding.

Financial Management (FM) mainly depends on efficient economic resource i.e. capital.

The technical flaws of Profit Maximization are: 1. Ambiguity 2 . Timing Benefits 3. Quality Benefits

Contd..Wealth Maximization

Wealth maximization is also known as value or net present worth maximization. It should satisfy all three requirement, i.e. exactness, quality and money value of time.

The technical flaws of Wealth Maximization are: 1. Focus on Stakeholders : Stakeholders include groups of employees, investors and stakeholders which are directly related to the firm. 2. EVA (Economic Value Added) : EVA is equal to after tax operating benefits of a firm less the cost of the firm

Conclusion

Financial Management is the mixture of

financial planning, administration and control.

Financial corporation deals with how

corporation obtains the funds and how

corporation allocates that funds.

References

http://

en.wikipedia.org/wiki/Financial_management

https://

48factoring.com/working-capital-financing

http://www.managementstudyguide.com/

financial-management.htm

http://www.slideshare.net/anurag_toby/

objectives-of-financial-management-26656656

Thank You !!!