There are definitely two approaches to determine the functions of financial management. In first category, the primary functions of financial management is to achieve goals with respect to liquidity as well as profits. In next category, the secondary functions of financial management for an organization is to define the technique, methods and strategies to manage and control assets and funds.
Top 10 – Functions of Financial Management:
Here we are going to focus on some of the key functions of financial management notes and will discuss in few lines to understand them.
1. Liquidity Functions:
Looking for adequate liquidity to hold out the business strategies, each financial manager should perform some primary tasks. Firstly, raising funds, the company gets funding from various source of funds. At different periods some various source of funds is going to be a lot more desirable. Secondly, forecasting cash flows, your day-to-day businesses need to get that the company to invest their bills easily. This will be mainly one matter of matching funding inflows against cash outflows. That the firm needs to be capable forecast your sources of funds plus timing to cash inflows from clients and use them towards suppliers and lenders payments.
2. Capital Requirement Estimation:
Finance manager or supervisor need to make estimation with regards to funds / capital requirement of an organization. This particular depends after profits, expected cost, policies, rules and future programs. Estimations is one of an important functions of financial management. Estimations have to be made in a sufficient manner through which it can improve earning potential of a company.
3. Capital Composition:
When the estimation of capital requirement have been completed. Your finance plan with respect to capital structure need to be determined. This involves long-term as well as short-term debt equity research and analysis. It will mostly depend after each proportion concerning equity capital, which a company is actually possessing and additional required funds that have to be raised from external parties.
4. Selecting a Sources of Funds:
To raise additional funds and to be obtained those funds, the best organization has many options. For example:
- Issue of debentures as well as shares.
- Loan to be taken from financial institutions or banks.
- Public deposits to be drawn just like at as a type of bonds. Choice of factor are determined by general demerits and merits concerning each source of funds and at each stage of company.
5. Price Control:
Many large companies possess comprehensive cost-accounting systems to monitor expenditure in areas for the company’s functions of financial management. Information are fed right into a software system every day. In addition, computer systems are also designed to highlight statistical important facts on tasks and activities to be displayed for a monitor.
Some of the relevant decision taken within company include the costs established for the items, services and products. Each philosophy then approach to pricing rules are important elements in company’s advertising efforts, brand and then sales. Determination of the appropriate worth is the best joint decision concerning marketing manager provides insight to just how varying worth will likely affect demand within the market and company’s competitive position. Each financial supervisor can supply insight about changes in expenditures at different levels of manufacturing and the revenue margins necessary to carry on the business successfully.
7. Capital Investment:
Finance manager is needed in order to choose allocation of funds entering into profitable ventures to ensure that there is an investment protection as well as a regular returns on investment is available. 8. Managing Funds: Funds can be seen as liquid assets of the company. The term funds contains funding held by your company, cash given by a company, funds borrowed by a company and funds gained by acquisitions of preferred stocks and equity stocks. Into the functions of financial management, your financial manager or supervisor acts as one specialized officer of a company. That the manager is responsible for allocating funds and tracking the sufficient funds available for a company to perform its business smoothly.
9. Distribution of Income:
The net revenues decision need to be established simply by finance supervisor. This can be done in two functions of financial management for an organization. Firstly by declaring dividend, It includes determining their rate of dividends along with bonus if any. Second by retaining income, the amount maintains to-be determined that upon expansion, innovation or any diversification plans of an organization.
10. Financial Control:
The finance manager not only need to build strategy to raise funds, allocate funds and make use of the funds, but he even need to build techniques and methods to work on financial control of funds. This can be complete thru some techniques just like ratio analysis, financial forecasting, pricing, cost control and much more.
On top of all the facts, the key role of financial supervisors, decision makers or all the professionals participating in financial decision of a company is to maximum valuation of the company. Here we have determined the functions of financial management notes that will assist an organization to achieve its long-term goal.
- Tutorial Course - Financial Management Basics For Beginners -
» e-Learning Chapter 1: What is Finance? Definition, Types, Source, Features and Importance
» e-Learning Chapter 2: What is Financial Management? Definition, Examples and its Importance
» e-Learning Chapter 3: Objectives of Financial Management
» e-Learning Chapter 4: Nature and Scope of Financial Management
» e-Learning Chapter 5: What is Managerial Accounting? Definition, Role, Job and Objectives
» e-Learning Chapter 6: Investment Valuation and Project Valuation Methods and Techniques
» e-Learning Chapter 7: What is Working Capital Management? Definition, Importance and Objectives
» e-Learning Chapter 8: Financial Risk Management – Techniques, Methods and Types
» e-Learning Chapter 9: Financial Management for Startups
» e-Learning Chapter 10: Financial Management for IT Services