Objectives of Financial Management

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Financial Management

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Financial management is a branch of management that specifies planning all the financial activities. The deals with all activities deliver to finance like equalization of funds, utilization of funds, managing the financial resources, etc.


Scope and Objectives of Financial Management

Financial management has a broad scope that involves different kinds of decisions. The scope of financial management is discussed below:


1. Financial Decisions: 

These are the decisions related to equalization of funds, utilization of those funds, forecasting the returns based on the investment, etc.


2. Investment Decisions: 

The name itself specifies that the decisions related to the investment. Whether it is fixed assets, working capital, investment, etc. Also, during the time of expansion of a form, the liquid assets and fixed assets will be considered as these investment decisions.


3. Dividend Decisions: 

These are the decisions related to the sharing activity of obtained profit. The sharing will be done in two ways. One is profit for shared holders, and the other is retained profits.

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Discuss the Objectives of Financial Management? 

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The objectives are nothing but the goals of financial management for which we are making different kinds of decisions. Means, objectives are the final aims of a particular organization or form or even a single project. So, in addition to the meaning and scope of financial management, it is also important to explain the objectives of financial management. They are as follows: 

  • Need to Get Aware of Availability of Funds:  

It is the primary objective of financial management. Every business organization should reach its peak position only with the help of well structured financial management. So it is essential to make sure that all the availability of funds and also plan for the equalization of funds from variable resources.

  • Structure of the Capital Optimally: 

It is also the main objective of financial management. It is to utilize all the capital in a structured way to its maximum extent. It means a single penny should not be wasted and also should not be misused or left. We should be able to balance both the equity and the capital in a proper way.

  • Optimum Utilization of Funds: 

We all know that every organization's final motto is to earn a profit. Earning more profit is not only increasing sales and production. It also happens due to the reduction in cost and capital. So the Financial Manager should ultimately utilize all the funds.

  • Efficient in Securing Funds: 

It is another basic objective of financial management, which focuses on providing proper security to the available funds. Acquiring huge funds is not only a big task. Ultimate utilization and providing proper safety and security to those funds is also such an important duty and objective of the Financial Manager. 

  • Maintain Records:

The financial management also helps to maintain proper records of every transaction of an organization related to monetary terms. It is one of the provisions to maintain security for the available funds and optimum utilization of funds.

  • Financial Information and Planning: 

Another critical objective of financial management is to provide proper financial information to the higher authorities as well as to the clients and lenders. Also, the Financial Manager should have a right plan with him regarding the funds, whether it is equalization or utilization or whatever it is.

These are the various goals and objectives of financial management. As it has a broad scope, the objectives also keep on increasing day by day according to the changes.


Functions of Financial Management

Based on the objectives and scope of financial management, the functions can be designed and derived. Because without knowing the purpose, we can't do an action right. Similarly, functions are the duties done by Financial personnel. Some of those functions are,

  • Controlling all the financial decisions.

  • Acquisition of funds from the available resources.

  • Managing liquid cash and cash related activities.

  • Maintaining proper records for all transactions.

  • Designing security measures to protect financial resources.

Conclusion

Hence we understood financial management and its objectives. So it is an organized way of maintaining, planning, and forecasting all financial decisions. It involves various objectives and functions. All together strive for the only ultimate goal, which is nothing but organizational growth.

FAQ (Frequently Asked Questions)

1. What are the Basic Elements of Financial Management?

Ans. Financial management is defined by various scholars. In easy terms, it is defined as a process of organizing, planning, maintaining all the financial activities and decisions in a structured way. The elements of financial management are as follows:

  • Planning

  • Controlling

  • Organizing

  • Directing or implementing

  • Decision making.

These are the elements involved in financial management. Each element has its importance and all the elements are interrelated and dependent on each other. So we should give equal priority to all the elements to achieve success.

2. Explain the Procedure of Financial Planning?

Ans. As financial planning is the first and foremost element of financial management, it involves a set of steps in its procedure. That is,

  • First, we need to define and accept the objectives of an organization.

  • Then we need to collect all the financial information and personnel information in detail. It should be recorded properly.

  • Analyzing all the information in a detailed way. Also, identify the strengths and weaknesses using SWOT analysis.

  • Now, it is time to create a plan to achieve the goals and objectives.

  • Finally, implement the plan properly and yield good returns.

3. What is the Significance of Financial Management?

Ans. financial management plays a significant role in every organization irrespective of its nature. It acts as the backbone of an organization. It has several advantages. They are- 

  • It helps to control all the financial activities.

  • It helps to forecast the output.

  • It also provides an opportunity to think about the expansion and the diversification of an organization.

  • It maintains cost-cutting and perfectly balances Financial activities.

  • Increases the efficiency of management as well as employees.

  • It helps to maintain transparency in the organization.

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