一、
the emergence of financial management as a d**tinct management d**cipline ** relatively recent and linked to changes in business and socio-economic scenario,brought about by the advancements in computer and **rmation technology,emergence of multi-product and multi-div**ion corporations with complex and dynamic organizational set-ups,increasing global competition etc.
finance,no doubt,** the sine qua non of business operations,and traditionally the role of financial manager(known as an accountant or accounts manager)was limited to managing business finance or‘counting the beans.’however,the emerging d**cipline of financial management varies considerably from its traditional functions and extends to inclusive functions of‘growing the beans.’
the role of financial manager can be best understood by analyzing the definition of financial management.according to prof.bradley,“financial management ** the area of business management,devoted to a judicious use of capital and a careful selection of sources of capital,in order to enable a spending unit to move in the direction of reaching its goals.”[cited gitman,1986;pg.8]th** definition points to the four essential aspects of financial management,an analys** of which exemplifies the role of a financial manager.
they are
financial management ** a d**tinct area of business management – i.e.financial manager has a key role in overall business management
prudent or rational use of capital resources –proper allocation and utilization of funds
careful selection of the source of capital – determining the debt equity ratio and designing a proper capital structure for the corporate
goal achievement – ensuring the achievement of business objectives viz.wealth or profit maximization.
the essential objective of financial management can be categorized into two broad functional categories –recurring finance functions and non-recurring or ep**odic finance functions-defining the functional role of a financial manager.
performing the regular finance functions including financial planning including assessing the funds requirement,identifying and sourcing funds,allocation of funds and income and controlling the use or utilization of funds towards achieving the primary goal of profit/wealth maximization.
二、
financial management refers to how businesses ra**e,use and monitor funds.it involves the processes of planning,monitoring and controlling the business's financial position and performance.effective financial management will allow a business to maxim**e profits,increase the wealth of its owners and expand the business.its strategic role ** to give the business long term,big picture goals to aim for,as well as the specific objectives needed to reach these goals.financial reports are crucial for effective financial management.there are two main types of financial reports
general purpose financial reports(gpfrs)?specific purpose.financial reports(spfrs)
gpfrs are financial statements that all public companies are required by law to produce.they include the balance sheet('statement of financial position')-,the-revenue statement(`statement of financial performance)and the statement of cash flows.gpfrs are the greatest insight many stakeholders h**e into the financial position of a business.these reports allow the business to be analysed over time and against other companies.gpfrs are produced in accordance with generally accepted accounting principles.
spfrs are financial statements,created by the business,to-be used by internal stakeholders such as management.they are detailed than gpfrs and are only created at the instruction of management.they can be created for any purpose are not bound by regulations,determining-how,they should be produced.typical spfrs include budgets,break-even,analyses and sales reports.
spfrs allow management to plan for the future,and compare actual and predicted performance.they are strategically designed to give management all the necessary **rmation to maxim**e efficient dec**ion making.
when managing the finances of a business,there are a few key objectives that a business will try to achieve:liquidity,profitability,efficiency,growth,return on capital
a business must try to balance each of these independent objectives and find the financial position that best suits its needs.