Role of Financial Manager in Corporate
Definition of Financial Management
According to Dr. S. N. Maheshwari,
"Financial management is concerned with raising financial resources and their effective utilisation towards achieving the organisational goals."
According to Richard A. Brealey,
"Financial management is the process of putting the available funds to the best advantage from the long term point of view of business objectives."
Functions of Financial Management
Functions of financial management can be broadly divided into two groups.
1. Executive functions of financial management, and
2. Routine functions of financial management.
Eight executive functions of financial management (FM) are:-
1. Estimating capital requirements : The company must estimate its capital requirements (needs) very carefully. This must be done at the promotion stage. The company must estimate its fixed capital needs and working capital need. If not, the company will become over-capitalized or under-capitalized.
2. Determining capital structure : Capital structure is the ratio between owned capital and borrowed capital. There must be a balance between owned capital and borrowed capital. If the company has too much owned capital, then the shareholders will get fewer dividends. Whereas, if the company has too much of borrowed capital, it has to pay a lot of interest. It also has to repay the borrowed capital after some time. So the finance managers must prepare a balanced capital structure.
3. Estimating cash flow : Cash flow refers to the cash which comes in and the cash which goes out of the business. The cash comes in mostly from sales. The cash goes out for business expenses. So, the finance manager must estimate the future sales of the business. This is called Sales forecasting. He also has to estimate the future business expenses.
4. Investment Decisions : The business gets cash, mainly from sales. It also gets cash from other sources. It gets long-term cash from equity shares, debentures, term loans
According to Dr. S. N. Maheshwari,
"Financial management is concerned with raising financial resources and their effective utilisation towards achieving the organisational goals."
According to Richard A. Brealey,
"Financial management is the process of putting the available funds to the best advantage from the long term point of view of business objectives."
Functions of Financial Management
Functions of financial management can be broadly divided into two groups.
1. Executive functions of financial management, and
2. Routine functions of financial management.
Eight executive functions of financial management (FM) are:-
1. Estimating capital requirements : The company must estimate its capital requirements (needs) very carefully. This must be done at the promotion stage. The company must estimate its fixed capital needs and working capital need. If not, the company will become over-capitalized or under-capitalized.
2. Determining capital structure : Capital structure is the ratio between owned capital and borrowed capital. There must be a balance between owned capital and borrowed capital. If the company has too much owned capital, then the shareholders will get fewer dividends. Whereas, if the company has too much of borrowed capital, it has to pay a lot of interest. It also has to repay the borrowed capital after some time. So the finance managers must prepare a balanced capital structure.
3. Estimating cash flow : Cash flow refers to the cash which comes in and the cash which goes out of the business. The cash comes in mostly from sales. The cash goes out for business expenses. So, the finance manager must estimate the future sales of the business. This is called Sales forecasting. He also has to estimate the future business expenses.
4. Investment Decisions : The business gets cash, mainly from sales. It also gets cash from other sources. It gets long-term cash from equity shares, debentures, term loans