The progress of a business is assessed in terms of maximization of profits and maximization of returns and maximization of wealth. In the attainment of these objectives, financial management plays a vital role in a business enterprise. It is concerned with the effective utilization of scarce capital, while effectively dealing with the factors that could pose risks on a business. Financial management aims at brining higher possible flow or returns to the owners in addition to working towards maximization of net present value of future returns in terms of the investments being made.
Financial management is concerned with effective utilization offunds at all times. It ensures whether sufficient funds are available to meet various day-to-day requirements of a business. This involves maintaining both liquidity and profitability of a business entity effectively and efficiently.
As regards profit maximization, it sets such effective tools and techniques through which the objective of profit maximization can be achieved successfully. In this way, it is concerned with managing current assets, such as, cash and marketable securities and receivables and inventories etc.
In relation to the investment activities, one of the important tasks of financial management is to undertake capital budgeting and management of mergers, the process of which leads to gain high returns to a business entity on thebasis of managerial efficiency. While encompassing various financing activities, financial management deals with cultivating sources and raising funds that leads eventually to maximize the wealth of shareholders.
It is thus being concerned with all the aspects of business operations, finance function is of great value and importance in a business leading the business to survival and growth. It is due to the efficient financial management that the value of a firm is increased, while the ability of a business entity in terms of its profitability can be immensely developed as well as the liquidity position be maintained efficiently at all times.
K.A.Fareed (Fareed Siddiqui)
Writer, Trainer, Author, Vba/Vb Developer
BBA; MBA-Finance; M.Phil-Financial Management; (PhD-Management)
Individual Member of Institute of Management Consultants of India
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