Firstly we discuss about Meaning of finance
Finance means revolves around the management of money or financial resources of a business enterprise.
Definition of finance:
According to F.W.Paish ,"finance may be defined as the position of money at the time it is wanted ".
According to jogn j Hampton : the term finance can be defined as the management of flows of money through organisations, whether it will be a corporation, school, bank or government agency etc
Meaning and definition of financial management
The term financial management consists of two words financial and managemen
Financial denotes the process of identifying,obtaining,and allocating sources of money . management is the process of planning , organising, coordination and controlling various resources for the accomplishment of organisational goal
Definition of financial management
According to Howard and Upton : Financial Management is the application of planning and control function of the finance functions"
According to Solomon : financial management is concerned with the efficient use of an important economic resources namely , capital Funds".
Importance of financial management
1) Finance is a controlling function
2) base for Managerial functions
3) wealth maximisation.
4) financial management is a analytical tool
5) Administrative in nature
6) finance function is centralised
Objectives of Financial management
there are two objective of financial management
1) Profit maximisation
2)Wealth maximisation
Profit maximisation :- The basic objective of financial management is to achieve optimal profit, both in the short and long run. Main aim of any kind of economic activity is earning profit. A business concern is also functioning mainly for the purpose of earning profit. Profit is the measuring techniques to understand the business efficiency of the concern.
Wealth maximisation: wealth maximization, where every shareholder’s value or hold over dividends should increase. These outcomes are related to business performance, which means that the better a business performs, the higher its market value of its shares will be.
Scope of financial management
There are three decisions :-
1) Investment decisions includes investment in fixed assets (called as capital budgeting). Investment in current assets are also a part of investment decisions called as working capital decisions.
2) Financial decisions - They relate to the raising of finance from various resources which will depend upon decision on type of source, period of financing, cost of financing and the returns thereby.
3) Dividend decision - The finance manager has to take decision with regards to the net profit distribution. Net profits are generally divided into two:
A) Dividend for shareholders- Dividend and the rate of it has to be decided.
B) Retained profits- Amount of retained profits has to be finalized which will depend upon expansion and diversification plans of the enterprise.
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