What Is Financial Management And What Is Its Goal ?

July 4th, 2006 Comments off
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What Is Financial Management?

Financial management involves the analyzing and interpreting the financial statement so as to be able to plan and control the business.

Unlike bookkeeping or accounting, financial management has a wider spectrum and its goals are as follows:-

  • to attain profitability and
  • liquidity for an enterprise.

In the very short run, a business needs cash/liquidity to survive but over a longer term period, it must be able to generate net incomes in excess of expenses to be on a going concern. [ refer to my article on profits versus cash ]

Some Areas Where Financial Management Are Generally Applied:

Working capital management including cash flow forecasting/management

Breakeven analysis & cost accounting

Business Valuation: how to value a business, computation of goodwill and others

Gearing and equity and debt financing

Reading and understanding financial statement of the enterprise

Ratio Analysis: assessing the enterprise liquidity, profitability, gearing and others

Raising finance in business

Capital Investment Appraisals

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Financial Accounting

 
 

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