How is the role of financial management beneficial to the organization? Explain
Answers
Explanation:
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Helps in improving the profitability of organisations; Increases the overall value of the firms or organisations; Provides economic stability; Encourages employees to save money, which helps them in personal financial planning.......
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Finance is an essential and indispensable part of any organization. It is difficult for organizations, whether profit-making or otherwise, to sustain themselves for long without proper finances. Not just that, the efficient management of these financial resources is essential to be sustainable and viable in the long-run. Financial management helps organizations to do so. Financial management refers to the effective and efficient planning, organizing, directing and controlling of financial activities and processes of an organization. This includes but is not limited to fund procurement, allocation of financial resources, utilization of funds, etc. Considering the importance of the finance function in organizations, the demand for professionals with these skills has always been steady. Today, it is possible for even non-finance professionals and entrepreneurs to learn finance concepts through a certified financial analyst course.
What are the major roles of financial management?
Financial decisions and controls: Financial management and financial managers play a crucial role in making financial decisions and exercising control over finances in the organization. They make use of techniques like ratio analysis, financial forecasting, profit and loss analysis, etc.
Financial Planning: The finance managers are responsible for the planning of financial activities and resources in the organization. To this end, they use available data to understand the needs and priorities of the organization as well as the overall economic situation and make plans and budgets for the same.
Capital Management: It is the responsibility of financial management to estimate the capital requirements of the organization from time to time, determines the capital structure and composition and makes the choice of source of funding for the capital needs.
Allocation and Utilization of financial resources: Financial management ensures that all financial resources of the organizations are used and invested effectively and efficiently so that the organization is profitable, sustainable and viable in the long-run.
Cash Flow Management: It is extremely important for organizations to have sufficient working capital and cash flow to meet their operational expenses and emergencies. Financial management tracks account payable and receivable to ensure there is sufficient cash flow available at all times.
Disposal of Surplus: The decisions on how the surplus or profits of the organizations is utilized is taken by the financial managers of the organizations. They decide if dividends should be distributed and how much as well as the proportion of profits that must be retained and ploughed back into the business.
Financial Reporting: Financial management maintains all necessary reports related to the finance of the organization and uses this as the database for forecasting and planning financial activities.
Risk Management: Sound financial management prepares the organization to forecast risks, put in place mitigation plans as well as to meet unforeseen risks and emergencies effectively.
Enrol yourself in a short term course in finance for working professionals and equip yourself with the skills required to efficiently manage the finances of your organisation