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Financial Management Refers To The Planning

Financial Management involves the planning, organizing, directing, and controlling of financial activities to achieve a firm's financial objectives. Key objectives include profit maximization, wealth maximization, ensuring liquidity, and optimal resource utilization, while functions encompass investment, financing, dividend, and liquidity decisions. Its scope includes both day-to-day operations and long-term planning, aiming to guide organizations towards profitability and growth.

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14 views1 page

Financial Management Refers To The Planning

Financial Management involves the planning, organizing, directing, and controlling of financial activities to achieve a firm's financial objectives. Key objectives include profit maximization, wealth maximization, ensuring liquidity, and optimal resource utilization, while functions encompass investment, financing, dividend, and liquidity decisions. Its scope includes both day-to-day operations and long-term planning, aiming to guide organizations towards profitability and growth.

Uploaded by

AMRIT
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Financial Management refers to the planning, organizing, directing, and controlling of financial activities such as

procurement and utilization of funds for a business. It plays a crucial role in ensuring that the financial resources
of an organization are managed efficiently to achieve the financial objectives of the firm.

Objectives of Financial Management:

Profit Maximization: This is the primary goal where the focus is on increasing the company’s profitability by
efficiently managing resources.

Wealth Maximization: This objective focuses on increasing the value of shareholders' equity and is considered
superior to profit maximization.

Ensuring Liquidity: Maintaining an adequate level of cash to meet short-term obligations is critical to avoiding
financial crises.

Optimal Utilization of Resources: Ensuring that resources are allocated in the most efficient way possible,
minimizing waste and inefficiency.

Functions of Financial Management:

Investment Decisions: Deciding where to allocate funds, particularly for long-term assets, to generate returns.

Financing Decisions: Determining the best financing mix (debt vs equity) to minimize the cost of capital and
maximize the firm’s value.

Dividend Decisions: Establishing policies for distributing profits to shareholders or reinvesting them in the
business.

Liquidity Decisions: Managing short-term assets and liabilities to maintain adequate liquidity without sacrificing
profitability.

Scope of Financial Management:

The scope encompasses planning and controlling all financial activities. It includes making critical decisions on
investment, financing, and dividend policies while ensuring a balance between risk and profitability. Additionally,
it involves day-to-day financial operations and long-term financial planning to achieve the overall corporate
objectives.

Financial management plays a pivotal role in guiding organizations towards profitability, sustainability, and
growth, aligning with the long-term interests of stakeholders

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