Meaning of Financial Management
The meaning of Financial Management is organizing, planning, directing and controlling the financial activities like procurement and use of funds of the enterprise. It means applying general management principles to financial resources of the enterprise.
Scope or Elements of Financial Management
1. Investment decisions involves investment in fixed assets (called as capital budgeting). Investment in current assets is as well a part of investment decisions called as working capital decisions.
2. Financial decisions - They relate to the raising of finance from several resources which will depend on decision on kind of source, period of financing, cost of financing and the returns thereby.
3.Dividend decision - The finance manager has to take decision along with to the net profit distribution. Net profits are usually divided into two:
a. Dividend for shareholders- Dividend and the rate of Dividend has to be decided.
b. Management: Cash is needed for many purposes like payment of salaries and wages and payment of electricity and water bills, meeting current liabilities, payment to creditors, maintenance of enough stock, purchase of raw materials, etc.
Financial controls: The finance manager has not just only to plan, procure and use the funds but he as well has to exercise control over finances. This can be done via several techniques like ratio analysis, cost and profit control, financial forecasting, etc.