Financial Management - Meaning, Objectives and Functions. There must be a proper balance between owned finance and borrowed finance. Objectives of Financial Management Wealth Maximization. Financial Management can be defined as: The management of the finances of a business / organisation in order to achieve financial objectives. It decides the ratio between owned finance and borrowed finance. He uses the finance of the company properly. Change ), You are commenting using your Twitter account. The purview of public finance is considered to be threefold, consisting of governmental effects on: The efficient … The main co… Investment decisions includes investment in fixed assets (called as capital budgeting). 6. A business concern operates mainly for the purpose of making profit. To ensure regular and adequate supply of funds to the concern. Responsibilities of the National Treasury with respect to National Public Funds In accounting, the terms \"sales\" and \"revenue\" can be, and often are, used interchangeably, to mean the same thing. What is Public Financial Management (PFM)? One of the main objectives of Financial Management is to maximize shareholder’s wealth, for which achievement of … Revenue does not necessarily mean cash received., making expenditures to support society, and implementing a financing strategy (such as issuing government debt). In simple terms objective of Financial Management is to maximize the value of firm, however it is much more complex than that. Financial management is one of the most important aspects in business. Introduction to Financial Management. Maintaining proper cash flow is a short-term objective of financial management. #Profit maximization. OBJECTIVES OF FINANCIAL MANAGEMENT The objective provide a framework for optimum financial decision making. He can collect finance from many sources such as shares, debentures, bank loans, etc. The company must borrow money at a low rate of interest. Pubic Financial Management (PFM) Reform Strategy. I satisfied with your explanation which u must indicated and thankful to your for supporting us in learning hard queries which we don’t understand your subscriber, You are being very brief and concise PFM refers to the set of laws, rules, systems and processes used by sovereign nations (and sub-national governments), to mobilise revenue, allocate public funds, undertake public spending, account for funds and audit results. This will bring high returns (profits) to the company. There is no profit motivation in the public sector. Financial management objectives give an overview of how an organization will allocate and monitor its income, expenditures and assets. “Financial management is concerned with the efficient use of an important economic resource, namely, capital funds.” Objectives of Financial Management Profit maximization. The government can use force to get revenue from individuals. That is, it tries to borrow money at a low rate of interest. The finance manager must take steps to reduce these risks. Retained profits - The volume has to be decided which will depend upon expansional, innovational, diversification plans of the company. Dividend declaration - It includes identifying the rate of dividends and other benefits like bonus. Privacy Policy, Similar Articles Under - Financial Management, 3 Modern Financial Management Techniques that Will Change Your Business, Financial Intermediaries - Meaning, Role and Its Importance, Role of the Finance Function in the Financial Management for Corporates. However, a company can earn maximum profits even in the long-term, if: Wealth maximization (shareholders’ value maximization) is also a main objective of financial management. Thank you. Reserves can be used for future growth and expansion. The objectives of management accounting is to make sure that a company or individuals is keeping an accurate financial record. The two schools of thought in this favor are Traditional Approach and Modern Approach. Training Objectives. This implies that the company’s decisions are taken while keeping in mind the profits of the business. In simple terms objective of Financial Management is to maximize the value of firm, however it is much more complex than that. It means applying general management principles to financial resources of the enterprise. One wrong decision can make the company sick, and it will close down. in simpler words charging higher tax from the rich and giving subsidies to the low-income; Progressive taxes can be used to finance public services such as … The financial management is generally concerned with procurement, allocation and control of financial resources of a concern. However, it’s the financial manager’s responsibility that the finances of … Wealth maximization means to earn maximum wealth for the shareholders. He cannot guarantee profits in the long term because of business uncertainties. There are two main objectives of financial management; Profit maximization and Shareholders wealth maximization. He must find out the fixed capital and working capital requirements of the company. This site uses Akismet to reduce spam. Profit is the measuring techniques to understand the business efficiency of the concern. identified four key objectives that effective public financial management should cover: aggregate financial management - fiscal sustainability, resource mobilisation and allocation operational management - performance, value for money and strategic financial planning and management governance - transparency and accountability Profit maximization is the main objective of financial management. ( Log Out /  It is generally accepted that a PFM system should achieve three objectives, to which we here add a fourth, namely the promotion of accountability and transparency, which is increasingly seen as an objective in itself, because of its close relationship to the notion of inclusive institutions: He must not waste the finance of the company. He must avoid high-risk projects. This e-Learning course on the basics of public financial management provides a quick introduction to PFM, explains the budget cycle, describes how accounting and financial reporting is done in the public sector, clarifies the concepts of internal controls and differentiates it from an internal audit, and explains how governments are audited. Public deposits to be drawn like in form of bonds. The reason for establishing a company is to make a profit and also run for many years. Financial management also tries to create a financial discipline. The management of the firm involves many stakeholders, including owners, creditors, and various participants in the financial market. The financial management is generally concerned with procurement, allocation and control of financial resources of a concern. Loans to be taken from banks and financial institutions. 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