Corporate Finance Tools

Financial Management: The Core of Organizational Functioning

Google+ Pinterest LinkedIn Tumblr

Financial management is the management, planning and control of financial resources in an organization. It’s concerned with handling all major planning and recommendation for the sort of funds and capital a company requires, keeping track of foreign exchange, distribution of dividends and efficient management of money. The goal is to eventually make the company more valuable to shareholders.

Financial management is essential for any company to function at its maximum, most efficient capacity; otherwise it runs the risk of losses, and of course going out of business.

What are the responsibilities of financial managers?

Financial managers in a company are responsible for things as small as maintaining appropriate cash flow which covers important day to day spending such as on utility bills, rent, repairs and maintenance costs, to larger more high-stake decisions such as the investment decisions, dividends and so forth.

Essentially, financial managers apply general principles of management onto finances. Their job is to ascertain maximum efficiency which will lead to:

  • Profit maximization—the decisions they make are meant to reduce costs and is the primary objective of financial managers.
  • Wealth maximization—which is making the company more valuable to the shareholders by increasing the wealth they’ve invested.
  • Cash flow—as mentioned above, they also handle the day to day expenses and cash flow
  • Choice of sources and funds—financial managers using analytical skills and market research develop custom plans for organizations to acquire funds. Depending on the industry, scale of the business and various other factors, they compare and strategize. Their recommendations are used to make major financial decisions regarding debts, equity funding asset management and liquidation.
  • Disposal of surplus—a little different from purely dividend distribution, this also includes determining the rates of the dividends, bonuses and so forth. They also use the surplus to accommodate the company’s plans and future decisions, whether they are expanding, diversifying or investing in more projects.

Efficient financial planning is essential for any company to see consistent results. To know more, visit our website.

Write A Comment