Financial management is the application of planning and control to the finance function. It helps in profit planning, measuring costs, and controlling inventories, accounts receivables etc. It also helps in monitoring the effective deployment of funds in fixed assets and in working capital. It aims at ensuring that adequate cash is on hand to meet the required current and capital expenditure. It facilitates ensuring that significant capital is procured at the minimum cost to maintain adequate cash on hand to meet any exigencies that may arise in the course of business.
DEFINITION OF FINANCIAL MANAGEMENT OR BUSINESS FINANCE
Financial management is an integral part of overall management. It is concerned with the duties of the financial managers in the business firm.
1. According to Weston and Brigham, “Financial management is an area of financial decision making, harmonizing individual motives and enterprise goals”.
2. According to S. C. Kuchal, “Financial management deals with procurement of funds and their effective utilization in the business”.
3. According to Howard and Upton, “Financial management is the application of general managerial principles to the area of financial decision-making”.
4. According to the Wheeler, “Business finance is that business activity which concerns with the acquisition and conversation of capital funds in meeting financial needs and overall objectives of a business enterprise”.
5. According to the Guthumann and Dougall, “Business finance can broadly be defined as the activity concerned with planning, raising, controlling, administering of the funds used in the business”.
Thus, Financial Management is mainly concerned with the effective funds management in the business. In simple words, Financial Management as practiced by business firms can be called as Corporation Finance or Business Finance. Corporate finance is concerned with budgeting, financial forecasting, cash management, credit administration, investment analysis and fund procurement of the business concern and the business concern needs to adopt modern technology and application suitable to the global environment.
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