Financial Management

 Financial Management is that managerial activity which is concern with planning and controlling of the firms financial resources. It is concerned with  acquiring financing and managing assets to accomplish the overall goal of business enterprise .

There are the two basic aspect of financial management :- 

Procurement of Funds :- Fund cab be obtained from various resources to meet the  funding needs of an organization or individual. Funds procured from different sources have different characteristics in the term of risk, cost and control. The cost of fund should be at the minimum level for that proper balancing risk and control factor must be carried out. Some Sources of funds are  Equity, Debentures, Funding from banking, International Funding.

Utilization of Funds  :- Deployment of the of financial resources to achieve the desired result of an organization or individuals. The situation arise where the funds are being kept idle or where proper use of fund is not being made. All the funds are procured at a certain cost and after entailing a certain amount of risk. If these funds are not utilized in the manner so that they generate an income higher than the cost of procuring them, there is no point in running the business.

Evolution of Financial Management :-  The evolution of  financial management is divided into three phases. 

1. Traditional Phase :- During this phase Financial Management was considered necessary only during occasional events such as takeovers, mergers, expansions, liquidations, etc. Also when taking financial decisions in the organization, the needs of outsiders to the business was kept in mind. 

2. Transitional Phase :- During this phase day to day problems that financial manager faced were given  importance. The general problems related to fund analysis, planning, and control were given more attention in this phase.

3. Modern Phase :- Modern phase is still going on, The scope of Financial Management has greatly increased now. It is important to carry out financial analysis for a company. This analysis helps in decision making. During this phase many theories have been developed regarding efficient markets, capital budgeting, option pricing, valuation models also in several other important fields in financial management.   

Financial management objectives :- 

1. Profit Maximization :- It has traditionally been argued that the primary objective of a company is to earn profit. Hence the objective of financial management is also profit maximization. This implies that the finance manager has to make his decision in a manner so that the profits of the concern are maximized. 

2. Wealth Maximization :- The shareholder value maximization model holds that the primary goal of the firm is to maximize its market value and implies that business decisions should seek to increase the NPV of the economic profit of the firm.

To achieve wealth maximization, the finance manager has to take careful decisions in respect of :-

A. Investment Decisions 

B. Financing Decisions

C. Dividend Decisions