Nature of Financial Management
Chapter 3 - NATURE OF FINANCIAL MANAGEMENT
What is finance
Finance can be defined as he art and science of managing money. Virtually all individuals and organizations earn or raise money and spend or invest money. Finance is concerned with the process, institutions, markets and instruments involved in the transfer of money among individuals, business and governments.
Nature of Financial Management
Financial Management as an academic discipline has undergone fundamental changes as regard its scope and coverage. In the earlier years, it was treated synonymously with the raising of funds. In the later years, its broader scope, included in addition to procurement of funds, efficient use of resources.
Scope of Financial Management
Financial is broadly concerned with the acquisition and use of funds by a business firm.
The important tasks of financial management, as related to the above, may be categorized as follows: -
A. Financial Analysis, Planning and Control • Analysis of financial condition and preference • Profit Planning • Financial forecasting • Financial Control
B. Investing • Management of current assets (cash, marketable securities, receivables and inventories) • Capital Budgeting (identification, selection and implementation of capital projects) • Managing of mergers, reorganizations and divestments
C. Financing • Identification of sources of finance and determination of financing mix • Cultivating sources of funds and raising funds • Allocation of profits between dividends and retained earnings
Important Topics in Financial Management
Table 1.1 Balance Sheet and Topics in Financial Management
Share Capital Equity Capital Structure and Cost of Capital Preference
Reserves and Surplus Debentures
Unsecured Loan Current Liabilities & Provisions Working Capital Trade Creditors Financing Policy Provisions
What is finance
Finance can be defined as he art and science of managing money. Virtually all individuals and organizations earn or raise money and spend or invest money. Finance is concerned with the process, institutions, markets and instruments involved in the transfer of money among individuals, business and governments.
Nature of Financial Management
Financial Management as an academic discipline has undergone fundamental changes as regard its scope and coverage. In the earlier years, it was treated synonymously with the raising of funds. In the later years, its broader scope, included in addition to procurement of funds, efficient use of resources.
Scope of Financial Management
Financial is broadly concerned with the acquisition and use of funds by a business firm.
The important tasks of financial management, as related to the above, may be categorized as follows: -
A. Financial Analysis, Planning and Control • Analysis of financial condition and preference • Profit Planning • Financial forecasting • Financial Control
B. Investing • Management of current assets (cash, marketable securities, receivables and inventories) • Capital Budgeting (identification, selection and implementation of capital projects) • Managing of mergers, reorganizations and divestments
C. Financing • Identification of sources of finance and determination of financing mix • Cultivating sources of funds and raising funds • Allocation of profits between dividends and retained earnings
Important Topics in Financial Management
Table 1.1 Balance Sheet and Topics in Financial Management
Share Capital Equity Capital Structure and Cost of Capital Preference
Reserves and Surplus Debentures
Unsecured Loan Current Liabilities & Provisions Working Capital Trade Creditors Financing Policy Provisions