What is Financial Management?
Financial management means utilizing business financial resources effectively and efficiently to achieve the organizational goals of revenue growth and wealth maximization. Finance professionals are liable to perform this job. An organization has the finance either through equity investment or by business loans. A financial manager typically decides which capital structure suits their organization. Capital structure means the combination of business debt and equity model to raise the organizational finance.
A finance manager also decides where to spend the organizational resources effectively and efficiently, which might result in more productivity and the organization’s financial success. A finance manager decides which amount should keep for working capital and which is for inventory. The finance manager also determines how much to keep in accounts receivable and how to bargain for more arrangements payable leverage.
Exceptional Business Growth is Directly Related to Effective Financial Management
A finance manager’s responsibility is to define all the policies and procedures of the finance department. If the manager can define such policies and procedures resulting in productivity and economic growth of the organization, then the business can earn many financial resources. With the help of these financial resources, financial managers decide to grow business by making capital investments in new machinery and equipment, as well as land and added property.
Financial accounting is the way to store and summarise accounting records and transactions which had happened in the past. At the same time, financial management analyzes those financial records and data summarised in the financial reports to predict the prospects of the business. Organizational financial decision-making is based on these analyses and predictions of the economic data. Summarising all this discussion, we can conclude that without adequate monetary management of the business, no business can survive in the short run or even in its incubation period.