importance of financial management essay

; finance, administration, production and marketing, but details regarding operating efficiency to their lacking financial statements are mainly concerned with the management’s interest in future of the organization. The idle cash with the enterprise will mean that it is not properly utilized. The utilisation of long term funds requires a proper assessment of different alternatives through capital budgeting and opportunity cost analysis. It is the useful measure the profitability of all financial resources invested in the firm’s assets. In the overall of a business is to earn a satisfactory return on funds invested in it, consistent with maintaining a sound financial position. It establishes a relationship between net profit and sales in overall measure of the firm’s ability to turn pound of sales into net profit, this ratio also indicate the firm’s capacity to withstand adverse economic conditions. Copyright 10. Management accounting helps to making decision of input to get proper efficiency. Financial management “is the operational and financing activity of a business that is responsible for obtaining and utilizing the funds necessary for effective operations. The term "ratios" is use to explain relationship connecting figures on a balance sheet, in profit and loss account, budgetary control system or any other part of accounting organization. A judicious utilisation of earnings is essential for expansion and diversification plans of the enterprise. Definition of Financial Management: Essay # 3. Here, Networking capital = Current assets – Current liabilities. Scope and Functions of Financial Management: The main objectives of financial management are to arrange the sufficient funds for meeting short term long term requirements of the enterprise. ; owners, management, employees and also outside the organization i.e. When a proper and well-made valuation of a business has been carried out, all lapses and drawbacks are analysed and mitigated, hereby, allowing for a solid stance of the establishment and proper strengthening of such establishment. Forecast, financial statements are prepared for selected future dates, generally for middle term and long term plans of the firm. Quick (or) Acid test ratio: Quick ratio = (Current assets – Inventory) / Current liabilities. (e) Sustained increase in the value of firm. Social responsi­bility includes service to the people, protecting the consumer, paying fare wages to the employ­ees, upliftment of the weaker sections, welfare facilities like medical education, environment improvement programmes etc. Individual stakeholders has various interest in the financial performance of a company, these groups of stakeholders analyze the financial performance of the company. Essay On Importance Of Financial Management 812 Words 4 Pages Financial management “is the operational and financing activity of a business that is responsible for obtaining and utilizing the funds necessary for effective operations. This indicates that how the funds will be used and how it will be financed over specific period of time. Every business enterprise is set up to earn profit, and no one is interested in taking risk unless he is assured of fair return on the investment. Preparation of detailed cash budgets and/or forecast funds flow statement so that future problems can be foreseen and remedial measures taken in advance. However government organisations have no profit motive but are created to serve the public. Financial management can also be defined as that part of management, which is related mainly with raising or acquiring the funds for the enterprise or firm in the most economical way, utilizing those funds as profitably as possible, for a given risk level, planning the future investment of those funds and controlling the current performance plus future development by adopting budgeting, cost accounting and financial accounting. The type of analysis varies according to the specific interest of the stakeholders. Conducting financial appraisal of the possible courses of action. A business organisation seek to achieve their objectives by obtaining funds from various sources and then investing them in different types of assets, such as plant, buildings, machin­ery, vehicles etc. Thus, Financial Management is concerned with the effective funds management in the business process. Investment decisions also include the decisions about mergers and acquisition of another company. Financial planning is the process of estimating the required funds and to determine the competition. Role of Financial Management in a Business: Essay # 5. In view of these factors the financial management scope concentrates on the following areas of finance function. Research question Are there any optimal capital structure [...], Leadership is an influence relationship among leaders and followers who intend real changes and outcomes that reflect their shared purposes. HR & Administration function is to Plan, organize, control and implement an efficient Human Resource Management and Administration functions for CPOC to ensure the right level of manning with the right capability at the right time with efficient administration to support and achieve business objectives. Net income ratio = (Net profit / sales) *100. In addition to taking capital investment decisions, finance managers are concerned with the management of current assets efficiently in order to maximise profitability relative to the amount of funds tied up in asset. Current ratio = Current assets / Current liabilities. 9. The ratio is really at the rate of current ratio and is found out by dividing the total current liabilities. The utilisation of surpluses or earnings is also an important factor in financial management. The finance executive must take into consideration the merits and demerits of the alternative scheme of utilizing the funds generated from the enterprise’s own earnings. The analysis is very important role in measuring the performance of the business. In earlier days, financial managers were primarily engaged in: But now-a-days with the developments and increasing complexi­ties in the business, responsibility of the financial managers have increased and they are now concerned with the decision-making process involving finance, i.e., capital investment. In order to know the cash requirements during different periods, the management should arrange for the preparation of cash flow statement in advance. Content Filtration 6. Accrual accounting is an accounting that revenues are recognized when sales have been made and expenses are recorded when they are incurred, even the cash receipt from the revenue or the cash payment related to, Protection of the value of the business Internal control could help improve efficiency and effectiveness of operating activities and thus firm performance. On the other hand , a low ratio is for the creditors in extending credit. Management accounting is a process of after recording financial data making financial statement and financial analysis to support managers in getting realistic-logical-related information, so that they can take proper decision. Orders:19 For any subject. Introduction: The goal of. Ratio analysis shows inter-relationship between the different items in the data. The liquidity position of the firm depends on the quality of the debtors to the great extent. But you can one from professional essay writers. The cash management should be such that neither there is shortage of it and nor it is idle. Uploader Agreement. Various sources from which finance may be raised include: shareholders’ debenture holders, banks and other financial institutions and public deposits etc. We will send an essay sample to you in 2 Hours. (ii) Obtaining best mix of financing and dividends. Functions. However, it will vary between industries and so it is important to compare within an industry. Gross income ratio = (Gross profit / Sales) *100.

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