What is financial management? Financial management is the process of effectively and efficiently planning and handling your finances carefully and properly in a manner that it will grow and increase into a hundred folds. The term typically applies to an institution, company or organization that functions to manage the company’s overall finances. It can include on how to increase profit and how to allocate capital effectively. Financial management is usually a long-term planning and management of the flow of a company’s finances and resources. It also covers the different agreements and deals between share holders and investors.
To Maximize Profit: The very main and major objectives of financial management are to maximize the profit which can only occur when marginal cost and marginal revenue meet at equilibrium. It is sometimes called the wealth maximization. It is a modern approach to managing the wealth and finances of companies and organization. You must also be aware that money and wealth needs the longer term of goals and planning.
Wealth Maximization: In the business or finances dictionary, the term wealth maximization refers to the total maximization of the share holder’s wealth. In a company, the share holder’s wealth is also paramount to the overall profit of the company’s owner.
For Company’s Survival: The effective and efficient management and flow of finances and wealth in a company or organization is what makes them running. Financial management is very crucial to a group, company or organization as this will determine their operation. The financial management group must be able to have a very small amount of error when deciding on things which involve money and finances of the company. A wrong move in the financial management will lead the company or organization into a bankrupt which is considered the greatest nightmare of every businessmen and entrepreneur.
To Have A Good Cash Flow: Financial management helps the company and organization to have a proper and good cash flow; this means to have an effective and efficient control of the finances and wealth that is running the company or the organization.
To Gain More Profit: Of course, one of the goals of companies everywhere is to increase their profit rather than increase the capital cost. With the financial management, it makes sure that the company can get a bigger return on their investment rather than the potential of losing investment.