Financial Management is the function of an organization concerned with profit and expense, cash and credit, and the ability to meet its objectives. This includes the management of the organization’s budget and determining its cash flow. However, it is not just about the numbers. Financial management also focuses on the overall operations of the organization.
A sound financial management strategy is critical to a company’s long-term growth and future viability. Profits are necessary for a company’s operations and growth, and they can be used to buy assets, expand coverage, or start new businesses. Profits can also be used to help protect the company from future financial crises.
Financial management also involves the planning, directing, and controlling of a company’s financial resources. It involves making decisions on how to invest cash, working capital, and fixed assets. It also involves decisions on borrowing from different sources. These decisions are dependent on a variety of factors, including the source of the financing, the cost, and the rate of return. The management of financial resources can also involve decisions on whether to retain profits or distribute dividends.
The manager of financial management needs to estimate the capital required by a company, based on the expected costs and profits, future policies, and programmes. These estimates must be made in a way that will increase the earnings capacity of the enterprise. The financial manager should also consider the capital structure, which involves determining short and long-term debt equity. This type of financial management is often associated with large corporations.