MEANING OF FINANCIAL MANAGEMENT

Financial Management is that organizational activity that is concerned with the management of financial resources. In common avalanche, finance is described as providing monitory resources at the time. They are required. But financial management covers the mobilisation and effective utilisation of fund. FM entails planning for the future of a person or a business enterprise with the aim of ensuring a positive cash flow.
DEFINITION OF FINANCIAL MANAGEMENT

According to Weeler, Financial Management is that business activity which is concerned with the acquisition and conservation of capital funds in meating financial needs and overall objectives of a business enterprise. According to Ezra Salomon, Financial Management is concerned with the efficient use of an important economic resources namely capital fund. According to Wenton & Brigham, FM is an area of financial decision making, harmonising individual motives and enterpris e goals.
FUNCTIONS OF FINANCIAL MANAGEMENT

Finance function for the sake of convenience may broadly be classified into 2 types. They are 1. Executive Functions 2. Incidental Finance Function
EXECUTIVE FUNCTIONS

The executive finance function is so termed because it requires some administrative skill in planning, execution and control. The executive functions are subdivided into 8 categories. They are

1. Capital Budgeting decisions 2. Capital Structure Decisions 3. Dividend Decisions 4. Working Capital Management 5. Financial Analysis Planning 6. Profit Planning 7. Corporate Taxation 8. Acquisition & Amalgamation
Capital Budgeting Decisions

The term capital budgeting is used to describe how managers plan significance outlays on projects that have long-term implications such as the purchase of new equipment and the introduction of new products. Capital budgeting is a combination of two types. The word capital refers to long term success of funds and budgeting refers to alloc ation of funds towards profitable projects. Hence Capital budgeting is the process by which firms provide funds to various investments appropriates to ensure profitability and growth. Capital budgeting decisions fall into two broad categories 1. Screening decisions: It relates to whether a proposed project meets some preset standard of acceptance. 2. Preference decisions: It relates to selecting from among several competing courses of action. The choice of which machine to purchase is a preference decisions.
Capital Structure Decisions

In finance, capital structure refers to the way a corporation finances its assets through some combinations of equity, debt or hybrid securities. A firms capital structure is then the composition or structure of its liabilities. Capital structure decisions are complex ones that involve weighing a variety of factors. In general, companies that tend to have stable sales levels, assets that

make good collateral for loans, and a high growth rate can used debt more heavil y than other companies. On the other hand, companies that have conservative management, high profitability, or poor credit ratings may wish to rely on equity capital instead.
Dividend Decisions

It is one more important area which requires careful consi deration regarding the dividends. How much amount of profits should be distributed among the share holders and how much amount should be retained for investing in the business will have to be decided by the management. Some factors are taken into consideration before a dividend decision is to be taken. 1. Assessing the shareholders expectations 2. Determining of dividend payout ratio & retention policy 3. Projecting the requirement of the funds for expansion & diversification proposals. 4. Considering the impact of the legal constraints on dividend decision.
Working Capital Management

Working capital management ensures a company has sufficient cash flow in order to meet its short term debt obligations & operating expenses. Working capital management is the device of finance. It is related to manage of current assets & current liabilities. Working capital is very significance for paying day to day expenses and long term liabilities. Working capital is that part of companys capital which is used for purchasing raw materials and involve in sundry debtors.
Financial Analysis Planning

The process of evaluating business, projects budgets and other finance related entities to determine their suitability for investment. It is performed by

professional who prepare reports using ratios that make use of information taken from financial statements and other reports. The reports are 1. Continue or discontinue its main operation or part of its business. 2. Make or purchase certain materials in the manufacture of its produc t.
Profit Planning

Profit planning is the process of developing a plan of operation that makes it possible to determine how to arrange the operational budget so that the maximum amount of profit can be generated. The actual process of profit planning involves looking at several key factors relevant to operational expenses. Profit planning is simply the development of your operating plan for the coming period.
Advantages of Profit Planning

1. Performance Evaluation 2. Awareness of Responsibilities 3. Disciplined approach to problem solving 4. Timing about the future 5. Confidence of lenders and investors
Corporate Taxation

Many countries impose corporate tax or company tax on the income or capital of some types of legal entities. A similar tax may be impos ed at state or lower levels. The taxes may also be a country or a subdivision of a country. Corporate may be taxed on their incomes, property or existence by various jurisdictions. Many jurisdictions impose a tax based on the existence or equity structure of the corporation.

Acquisition & Amalgamation

Acquisitions are often made as part of a companys growth strategy whereby it is more beneficial to take over existing firms operations. These are often paid in cash, the acquiring companys stock or a combination of both. In general, amalgamation is the process of combining or uniting multiple entities into one form. Amalgamate and its derivatives may refer to: 1. Metal & Science 2. The merge or consolidation of companies 3. The strategy of naming something after a combination of existing names
CONCLUSION

In common avalanche, finance is described as providing monitory resources at the time. They are required. But financial management covers the mobilisation and effective utilisation of fund. FM entails planning for the future of a person or a business enterprise with the aim of ensuring a positive cash flow. Financial Management is that business activity which is concerned with the acquisition and conservation of capital funds in meating financial need s and overall objectives of a business enterprise.
REFERENCES

 I.M. Pandey: Financial Management, 9/e, Vikas Publishing, 2004.  Srivatsav, RM: Financial Management, Himalaya Publishing House, Mumbai.

ESWAR COLLEGE OF ENGINEERING

FINANCIAL MANAGEMENT
1st MBA, 2nd SEM, 1st MID

TOPIC

Explain financial managerial functions

SUBMITTED BY

K. Aswaini Roll No: 10JE1E0006