Hence, the management accountants are recording all the business transactions in rupee value on different dates without making any distinction between the rupee value of two dates. The sources should be commensurate with the need of the business. Functional Areas of Management: These include: Financial Management includes accounting, budgetary control, quality control, financial planning and managing the overall finances of an organization. Financial Statements are prepared at the end of the accounting period. Relevant dividend view: Farrar, Salwyn and Gordon are representatives of this theory. Loss of investment, in any one line, might lead to capital depletion; and ultimately tell upon the financial health of the enterprise.
He should find out financial needs of the company. Thus, finance manager is in dilemma. Owners: The management of an enterprise is supposed to pursue the objective set for the firm. Within this you are asked to calculate and analyse appropriate ratios covering the areas of profitability, efficiency, liquidity and investment, using the information detailed above. Financing Decisions or Decisions of Financial Manager a. The Functions of a Finance Manager are; 1. The use of various techniques by the finance manager will help him in evaluating the performance in various areas and take corrective measures whenever needed.
The company is a complex organization of various interested stakeholders like owners, employees, creditors, customers and government, etc. Towards the close of the 1950s Modigliani and Miller even argued that sources of capital were irrelevant and only the investment decisions were relevant. Objective criteria for commitment of funds in individual assets were evolved. Dividend decisions Investment decisions - which determine how scare or limited resources are committed to projects - It should consider profitability that will lead to the creation of wealth Financing decisions - asserts the mix of debt and equity or capital structure decision Financial leverage refers to the use of debt to acquire additional assets. Evaluation of usefulness of Hermes principle Appendices 1 Retail gearing 2 Share 3 Dividend paid 4 Business model 5 … 1125 Words 5 Pages as lending and borrowing needs in an organization. Furthermore, in a competitive world, a company must undertake actions which are reasonably consistent with wealth maximisation objectives.
Financial planning is hardly given important place. In this figure, the horizontal axis measures rupees of investment during a year, while the vertical axis shows both the percentage cost of capital and the rate of return on projects. Dynamic Function: Management should be equipped to face the changes in business environment brought about by economic, social, political, technological or human factors. Not only about long term budgeting but also how to allocate the short term resources like current assets. This is necessary so that each individual should what is expected from him and to whom he need to report to. Return and risk to the equity shareholders depends on how optimally the debts and financial leverages are used.
Financial Statements disclose both facts and opinions. It helps in profit planning, measuring costs, controlling inventories, accounts receivables. This is yet, another important operational objective of the financial, management. In the same manner the financing decision may involve a choice between a debt equity ratios of 1:1 or 2:1, the divided decision may be concerned with the quantum of profits to be distributed. Such was the total turn in the emphasis of financial management. Financial management is an integral part of overall management.
Investments can help a firm maintain strong future cash flows by the achievement of key corporate objectives e. In the 1980s further advances in financial management were found. Wealth maximization is more appropriately a decision criterion , rather than an objective or a goal. First — concerning to finance and cash, second — increasing of fund and their administration, third — along with the activities of rising funds, these are part and section of total management, Isra Salomon fingered that in view of funds utilization third cluster has broader scope. It also helps in monitoring the effective deployment of funds in fixed assets and in working capital. They are convention of conservatism, convention of full disclosure, convention of consistency and convention of materiality. Deciding Capital Structure: - The capital structure refers to the kind and proportion of different securities for raising funds.
Meaning of Financial Statements Financial statements means the statements prepared for the purpose of presenting a periodical review or report on the progress of business by the management. Nature of Financial Management Financial Management as an academic discipline has undergone fundamental changes as regard its scope and coverage. Although borrowing costs are significant costs to the government as a whole, they may not be. A financial manager will have to concentrate on the following areas of finance function: 1. Short run management of funds relates to the total business cycle activities.
Office Management includes activities to properly manage the layout, staffing and equipment of the office. Expansion of an economic activity depends on the effectiveness of dividend decisions and scope of. He performs a trinity of roles-that of a line officer over the Finance Department; a functional expert commanding subordinates throughout the enterprise in matters requiring financial discipline and a staff adviser, suggesting the best financial plans, policies and procedures to the Top Management. Finance management is a long-term decision-making process which involves a lot of , allocation of funds, discipline and much more. The developments since the 1990s may be called post modern financial management with great degree of global financial integration net supported finances and so on.
Nature of financial management basically involves decision where risk and return are linked with investment. Weston and Brigham depict the above orientation in the exhibit given below: 31 Polic y Decis ions Risk Return Value of Institute iii Financial management essentially involves risk-return trade-off. If dividends are too high, the business may be starved of funding to reinvest in growing revenues and profits further. A capital budgeting decision involves the decision of allocation of funds to long-term assets that would yield cash flows in the future. This is referred to the risk-return trade-off. Then there will be no need to depend on external loans. Personnel Management includes recruitment, training, transfer promotion, demotion, retirement, termination, labor-welfare and social security industrial relations.