Question

Function of financial management?

Answer 1

Financial Management refers to efficient and effective management of money in such manner as to accomplish the objectives of the organization.
It is the specialized function directly associated with the top management.

Answer 2

Financial controls: The finance manager has not only to plan, procure and utilize the funds but he also has to exercise Estimation of capital requirements: A finance manager has to make estimation with regards to capital requirements of the company. This will depend upon expected costs and profits and future programmes and policies of a concern. Estimations have to be made in an adequate manner which increases earning capacity of enterprise.Determination of capital composition: Once the estimation have been made, the capital structure have to be decided. This involves short- term and long- term debt equity analysis. This will depend upon the proportion of equity capital a company is possessing and additional funds which have to be raised from outside parties.Choice of sources of funds: For additional funds to be procured, a company has many choices like-Issue of shares and debenturesLoans to be taken from banks and financial institutionsPublic deposits to be drawn like in form of bonds.Choice of factor will depend on relative merits and demerits of each source and period of financing.Investment of funds: The finance manager has to decide to allocate funds into profitable ventures so that there is safety on investment and regular returns is possible.Disposal of surplus: The net profits decision have to be made by the finance manager. This can be done in two ways:Dividend declaration - It includes identifying the rate of dividends and other benefits like bonus.Retained profits - The volume has to be decided which will depend upon expansional, innovational, diversification plans of the company.Management of cash: Finance manager has to make decisions with regards to cash management. Cash is required for many purposes like payment of wages and salaries, payment of electricity and waterbills, payment to creditors, meeting current liabilities, maintainance of enough stock, purchase of raw materials, etc.Financial controls: The finance manager has not only to plan, procure and utilize the funds but he also has to exercise  control over finances. This can be done through many techniques like ratio analysis, financial forecasting, cost and profit control, etc.