Finance is the lifeblood of business. The success of business depends, to a great extent, on the manner in which it raises, employs and disburses its funds. All these finances come in the financial management. Financial management includes planning, organizing, coordinating, selecting the finance of the company. Some importance of financial management as follows:
- Anticipates Cash Flows- Financial management anticipates the funds needed by business for achieving the aims.
- Raises the fund- Once the fund required by the business is estimated, financial management is accountable for the acquisition of such funds. They have to bring funds at a minimal cost.
- Determines Capital Structure-The management determines the optimum capital structure of the organization. The capital structure includes debt and equity structure.
- Proper Use of Funds-Proper utilization of financial resources is the main importance of financial management.
- Facilitates Cost Control-Financial Management will ensure cost control by taking different remedies.
- Manages Cash Movements-Financial Management assures that there is no shortage or surplus of cash. They manage the inflow and outflow of cash.
- Better Disposal Of Surplus- Disposal of surplus decisions is taken by financial management. They have to make the best decision.
Role of Financial Management
- Raising of Funds- An organization can raise funds by the way of equity and debt. The financial manager is accountable to maintain a good balance between equity and debt.
- Allocation of Funds-After raising the funds, the financial manager has to allocate funds in such a way that ensures the growth of the organization.
- Profit Planning- Profit earning is important for the survival and sustainability of any organization. Profit planning refers to the proper usage of the profit generated by the firm. The financial manager has to do perfect planning for achieving goals.
- Understanding Capital Markets-Shares of a company are traded on the stock market. The financial manager must have knowledge of capital markets. He has to maintain activities regarding raising funds. So he has to understands the capital market