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    Nature and Scope of Financial Management

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    Mecmack Nartea
    Financial management has evolved from only collecting funds to planning and controlling financial resources as well as properly utilizing funds. It is now an important part of business management. Modern financial management takes a broader view, considering both acquisition and effective use of funds. It addresses long-term and short-term financial issues through investment, financing, and dividend decisions aimed at maximizing shareholder wealth.

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    Nature and Scope of Financial Management

    Uploaded by

    Mecmack Nartea
    28 views12 pages
    Financial management has evolved from only collecting funds to planning and controlling financial resources as well as properly utilizing funds. It is now an important part of business management. Modern financial management takes a broader view, considering both acquisition and effective use of funds. It addresses long-term and short-term financial issues through investment, financing, and dividend decisions aimed at maximizing shareholder wealth.

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    Nature and scope of financial management

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    fin man topic 1

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    Financial management has evolved from only collecting funds to planning and controlling financial resources as well as properly utilizing funds. It is now an important part of business management. Modern financial management takes a broader view, considering both acquisition and effective use of funds. It addresses long-term and short-term financial issues through investment, financing, and dividend decisions aimed at maximizing shareholder wealth.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    28 views12 pages

    Nature and Scope of Financial Management

    Uploaded by

    Mecmack Nartea
    Financial management has evolved from only collecting funds to planning and controlling financial resources as well as properly utilizing funds. It is now an important part of business management. Modern financial management takes a broader view, considering both acquisition and effective use of funds. It addresses long-term and short-term financial issues through investment, financing, and dividend decisions aimed at maximizing shareholder wealth.

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    Nature And Scope of Financial

    Management
    Financial management is such a
    managerial process which is concerned
    with the planning and control of
    financial resources.
    In the initial years of its development,
    financial management was concerned
    only with collection of funds for
    business. But according to modern
    viewpoint, not only collection of
    funds
    but
    also
    their
    proper
    utilization are the basic functions
    of financial management.

    Financial manager

    has become as
    important constituent of business and he provides his
    significant contribution to all business activities. He
    estimates the requirement of funds, plans the
    different sources of funds and performs the functions
    of collection of funds and their effective utilization. As
    all the business activities like marketing, purchase,
    production etc include the creation and utilization of
    funds, financial manger must be clear about his duties
    and responsibilities in relation to these activities.

    Characteristics of Modern
    Approach
    1.
    2.

    More Emphasis on Financial Decision

    3.
    4.
    5.

    Continuous Function

    Financial Management as an Important


    Component of Business Management
    Broader View
    Measure of Performance

    Modern Approach to Finance Function

    According to this approach, financial management


    considers the broader and analytical viewpoint.
    According
    to
    this
    approach,
    financial
    management is concerned with both acquisition
    of funds and their effective and optimum
    utilization. This viewpoint not only considers the
    sporadic events but also the long term and
    short-term financial problems. Three decisions
    are taken under financial management :

    Finance Function

    i. Investment Decision
    ii. Financing Decision
    iii. Dividend Decision

    Meaning of Financial Management

    J.L. Massie :- Financial Management is the


    operational activity of a business that is
    responsible for obtaining and effectively
    utilising the funds necessary for efficient
    operations.

    Functions of Financial
    Management
    1.
    2.
    3.
    4.
    5.
    6.

    Financial Planning
    Financial Decision
    Investment Decision
    Dividend Policy Decision
    Financial Control
    Incidental Functions

    Objectives of Financial
    Management
    (i) Profit Maximization Approach
    (ii)Wealth Maximization Approach

    (i) Profit Maximisation


    Approach
    According to this approach, a firm should undertake
    all those activities which add to its profits and
    eliminates all others which reduce its profits.
    Criticism

    (i)Ambiguity
    (ii)Time Value of Money
    (iii)Risk Factor

    Wealth Maximisation Approach :


    - According to this approach, financial management
    should take such decisions which increase net
    present value of the firm.

    Importance of Financial Management

    (1)Significant part of Business Management


    (2)Liquidity and Profitability
    (3)Value of firm
    (4)Centralized Nature
    (5)Benefits to shareholders Benefits to
    Investors

    (6)Other Benefits

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