Financial Management means planning, organizing, directing and controlling the financial activities. It teaches you how to develop accurate and useful financial statements for your business. Learn how to understand principles of leverage, cash management, and asset investment. Financial management entails planning for the future of a person or a business enterprise to ensure a positive cash flow.
There are three key elements to the process of financial management:
(1) Financial Planning
We need to plan for every investment as it is the most important part of financial management. Once the estimation has been made, the capital structure have to be decided. This involves short- term and long- term debt equity analysis. This will depend upon the proportion of equity capital a company is possessing and additional funds which have to be raised from outside parties. Financial managers aim to boost the levels of resources at their disposal. Besides, they control the functioning on money put in by external investors.
(2)Financial control
The finance manager has not only to plan, procure and utilize the funds but he also has to exercise control over finances. This can be done through many techniques like ratio analysis, financial forecasting, cost and profit control, etc. Management control as exercised in planning, performance evaluation, and coordination of financial activities aimed at achieving desired return on investment. Managers use financial statements operating ratios, and other financial tools to exercise financial control.
(3) Financial Decision-making
A key financing decision is whether profits earned by the business should be retained rather than distributed to shareholders via dividends. If dividends are too high, the business may be starved of funding to reinvest in growing revenues and profits further. Making good financial decisions is often the difference between a prosperous, growing farm business and one that is constantly wondering how to pay the next bill.