Scribd
Upload
8 views8 pages

Chapter 1 Fin Man Part 1

Financial management involves planning, organizing, directing, and controlling financial activities to achieve a firm's goals. It encompasses responsibilities such as acquiring funds, investing in profitable ventures, and ensuring financial needs are met through the five A's: anticipation, acquisition, allocation, appropriation, and assessment. Additionally, financial management is distinct from accounting and economics, focusing on maximizing returns and long-term growth.

Uploaded by

Whatxchamaco
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
8 views8 pages

Chapter 1 Fin Man Part 1

Financial management involves planning, organizing, directing, and controlling financial activities to achieve a firm's goals. It encompasses responsibilities such as acquiring funds, investing in profitable ventures, and ensuring financial needs are met through the five A's: anticipation, acquisition, allocation, appropriation, and assessment. Additionally, financial management is distinct from accounting and economics, focusing on maximizing returns and long-term growth.

Uploaded by

Whatxchamaco
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 8

FINANCIAL

MANAGEMENT
Chapter 1
What is Financial Management?
• Financial management refers to the application of
general management principles to the various
financial resources.
• Financial management encompasses planning,
organizing, directing and controlling of the financial
activities.
• Financial management is a decision-making process
concerned with planning, acquiring and utilizing funds
in a manner that achieves the firm’s desired goals.
Scope of Financial Management
• The basic responsibility of the Finance Manager is to acquire
funds needed by the firm and investing those funds in
profitable ventures that will maximize the firm’s wealth, as
well as, generating returns to the business concern.
• The finance manager is expected to analyze the business
firm and determine the following:
• The total funds requirements of the firm.
• The assets or resources to be acquired.
• The best pattern of financing the assets.
Scope of Financial Management
Financial management has a wide scope. It includes the following five
A’s:
• Anticipation. The financial needs of the company are being
estimated. That is, it finds out how much finance is required by the
company.
• Acquisition. It collects finance for the company from different
sources.
• Allocation. It uses this collected or acquired finance to purchase fixed
and current assets for the company.
• Appropriation. It distributes part of the company profits among
shareholders, debenture holders, and some are kept as reserves.
• Assessment. It also means controlling all the financial activities of the
company. It checks if the objectives are met. If not, it determines
what can be done about it.
Financial Management and Accounting
• Financial management is a separate management area. In
many organizations, accounting and finance functions are
intertwined and the finance function is often considered as
part of the functions of the accountant.
• The finance manager will make use of the accounting
information in the analysis and review of the firm’s
business position in decision making.
• Finance function is considered a distinct and separate
function rather than simply an extension of accounting
function.
Financial Management and Economics
• Financial managers can make better decisions if they apply
basic economic principles.
• The finance manager must be familiar with the
microeconomic and macroeconomic environment aspects
of business.
• When making investment decisions, financial managers
consider the effects of changing supply, demand, and price
conditions on the firm’s performance. Understanding the
nature of these factors helps managers make the most
advantageous operating decisions.
Financial Objectives
• Short and Medium-Term
•Maximization of return on capital employed or
return on investment
•Growth in earnings per share and
price/earnings ratio through maximization of
net income or profit and adoption of optimum
level of leverage
•Minimization of finance charges
Financial Objectives
• Long-Term
•Growth in the market value of the equity
shares through maximization of the firm’s
market share and sustained growth in
dividend to shareholders
•Survival and sustained growth of the firm

You might also like