,
,
, Lesson -9
FINANCIAL MANAGEMENT
Business Finance is the money required to perform business activities,
including daily operations, purchasing assets, and managing financial
obligations.
Financial Management • Financial Management involves planning,
organizing, directing, and controlling the financial activities such as
procurement and utilization of funds in the business. • It includes making
decisions about investments, financing, and dividends to ensure the financial
stability and growth of the business.
Importance of Financial Management
•The size and the composition of Fixed Assets of the business:- Proper
investment in fixed assets ensures that funds are not excessively tied up,
maintaining a balance between growth and liquidity.
•The quantum of Current Assets and its break-up into cash, inventory
and receivables:- With an increase in the investment in fixed assets, there is
a commensurate increase in the working capital requirement. Effective
management of cash, inventory, and receivables is crucial for maintaining
the necessary working capital.
• The amount of long term and short-term funds to be used: - an
organisation wanting to have more liquid assets would raise relatively more
amount on a long-term basis. There is a choice between liquidity and
profitability.
Break-up of long-term financing into debt, equity etc: - of the total
long-term finance, the proportion is raised by way of debt and equity.
The amt. of debt, equity share capital, preference share capital is
affected by the financial decision, which is a part of financial
management.
• All items in the Profit & Loss account: e.g., interest, expenses,
depreciation etc: higher amount of debt means higher interest expense in
future. similarly, use of higher equity may entail higher payment of
dividends.
,
, Lesson -9
FINANCIAL MANAGEMENT
Business Finance is the money required to perform business activities,
including daily operations, purchasing assets, and managing financial
obligations.
Financial Management • Financial Management involves planning,
organizing, directing, and controlling the financial activities such as
procurement and utilization of funds in the business. • It includes making
decisions about investments, financing, and dividends to ensure the financial
stability and growth of the business.
Importance of Financial Management
•The size and the composition of Fixed Assets of the business:- Proper
investment in fixed assets ensures that funds are not excessively tied up,
maintaining a balance between growth and liquidity.
•The quantum of Current Assets and its break-up into cash, inventory
and receivables:- With an increase in the investment in fixed assets, there is
a commensurate increase in the working capital requirement. Effective
management of cash, inventory, and receivables is crucial for maintaining
the necessary working capital.
• The amount of long term and short-term funds to be used: - an
organisation wanting to have more liquid assets would raise relatively more
amount on a long-term basis. There is a choice between liquidity and
profitability.
Break-up of long-term financing into debt, equity etc: - of the total
long-term finance, the proportion is raised by way of debt and equity.
The amt. of debt, equity share capital, preference share capital is
affected by the financial decision, which is a part of financial
management.
• All items in the Profit & Loss account: e.g., interest, expenses,
depreciation etc: higher amount of debt means higher interest expense in
future. similarly, use of higher equity may entail higher payment of
dividends.
