Overview of Financial Management
                     OVERVIEW OF FINANCIAL MANAGEMENT
INTRODUCTION
Financial Management means planning, organizing, 
directing and controlling the financial activities such 
as procurement and utilization of funds of the 
enterprise. 
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SCOPE/ELEMENTS
Investment decisions includes investment in fixed assets 
(called as capital budgeting). Investment in current 
assets are also a part of investment decisions called 
as working capital decisions.
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FINANCIAL DECISIONS
 They relate to the raising of finance from various 
resources which will depend upon decision on type of 
source, period of financing, cost of financing and the 
returns thereby.
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DIVIDEND DECISION
The finance manager has to take decision with regards to the 
net profit distribution. Net profits are generally divided into 
two:
1. Dividend for shareholders- Dividend and the rate of it has 
to be decided.
2. Retained profits- Amount of retained profits has to be 
finalized which will depend upon expansion and 
diversification plans of the enterprise.
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OBJECTIVES OF 
FINANCIAL 
MANAGEMENT
1. To ensure regular and adequate supply of funds to 
the concern.
2. To ensure adequate returns to the shareholders 
which will depend upon the earning capacity, market 
price of the share, expectations of the shareholders.
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OBJECTIVES OF 
FINANCIAL 
MANAGEMENT CONT.
1. To ensure optimum funds utilization. Once the funds 
are procured, they should be utilized in maximum 
possible way at least cost.
2. To ensure safety on investment, i.e, funds should be 
invested in safe ventures so that adequate rate of 
return can be achieved.
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8
FUNCTIONS OF FINANCIAL MANAGEMENT
ESTIMATION OF 
CAPITAL 
REQUIREMENTS
A finance manager has to make estimation with regards 
to capital requirements of the company. This will depend 
upon expected costs and profits and future programmes 
and policies of a concern.
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DETERMINATION OF 
CAPITAL COMPOSITION
Once the estimation have been made, the capital 
structure have to be decided. This involves short- term 
and long- term debt equity analysis. This will depend 
upon the proportion of equity capital a company is 
possessing and additional funds which have to be raised 
from outside parties.
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INVESTMENT OF 
FUNDS
The finance manager has to decide to allocate funds 
into profitable ventures so that there is safety on 
investment and regular returns is possible.
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MANAGEMENT OF 
CASH
Finance manager has to make decisions with regards to 
cash management. Cash is required for many purposes 
like payment of wages and salaries, payment of 
electricity and water bills, payment to creditors, meeting 
current liabilities, maintenance of enough stock, 
purchase of raw materials, etc.
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