Financial management is an activity arranging, budgeting, audit, supervision, control, search and storage space of money owned by an organization or company. management Activities
Financial management related to the three activities, namely:
Activities use of funds, the activity to invest in various assets.
Activities proceeds, namely activities to obtain financial resources, both from internal funding sources along with external funding sources.
Asset management activities, namely after the money obtained and allocated in the form of assets, the fund should be managed as effectively as possible.
A finance manager in a company must know how to manage all the elements and in economic terms, this must be done because finance is among the important functions in achieving the objectives of the company.
Elements of financial management should be known by a manager. Let’s say that a financial manager did not know what-what are the elements of financial management, it would appear difficult to run a company.
Therefore, the financial manager should be able to find out all the activities of financial supervision, especially analyzing the source and use of its funds to realize the maximum benefit for the company. A financial manager must understand the movement of money in circulation, both external and internal.
Financial Management Function
Here is a brief explanation of the function of Financial Supervision:
Financial planning, cash flow and expenditure to make plans as well as other activities for a certain period.
Financial budgeting, follow-up of economic planning by making details of expenditures and revenues.
Financial Management, used business funds to maximize the funds available by various means.
Finance search, discover and exploit the solutions available for the operational activities of the company.
Financial storage, raising the company along with storing and securing these money.
Financial control, evaluation and improvement of funds and financial systems in the enterprise.
Audit, inner audit on the existing corporate finance to avoid deviations.
Financial reporting, providing information about the financial condition of the company along with an evaluation
When associated with this objective, the economic manager functions include the following:
Supervision over costs
Setting a price policy
Predicting the future earnings
Measuring or explore the price of working capital
Objectives of Financial Management
Objectives of Financial Supervision is to maximize the value of the company. Thus, if one day the company is sold, then the price can be set as substantial as possible. A manager should also be able to reduce the flow of money in circulation to avoid unwanted actions.
Analysis of Funding Options and Uses
Analysis of the foundation of cash or fund analysis is important for the financial supervisor. This analysis pays to to know how cash are used and the foundation of the acquisition of these funds. A written report that describes the foundation of the foundation of funds and usage of funds. The analysis software which you can use to look for the condition and financial functionality of the company may be the research of the ratio and proportion.
The first rung on the ladder in the research of the foundation and usage of funds is a written report of the alterations prepared based on two balance sheets for just two times. The survey describes the change of every of these components that reflect their supply or usage of funds.
In general, economical ratios are calculated could be grouped into six types:
Liquidity ratio, this ratio to assess a company’s capability to meet its short-term obligations.
Leverage ratio, this ratio can be used to measure just how much of the money that are given by the owner of the business compared to the money obtained from the business’s creditors.
Activity Ratio, this ratio can be used to gauge the effectiveness of control in the usage of its resources. All of the activity ratio consists of a comparison between your degree of sales and investments in a variety of kinds of treasure.
Profitability ratio, this ratio can be used to gauge the effectiveness of control as found from the revenue generated on product sales and investment companies.
Progress ratio, this ratio can be used to measure how very well the company maintain steadily its economic position of economical and industrial growth.
Valuation Ratios This ratio can be a way of measuring the company’s achievements of the very most complete due to these ratios reflect the merged effects of the chance ratio with the ratio of the come back.
Definition of Capital
The term “capital” is normally interpreted to mean a lot of things, the conditions of capital expenditures the business can be split into two, namely: capital effective and passive capital. Effective capital may be the wealth or the usage of money, while passive capital can be a way to obtain funds.
Financial manager is anyone who has the right to have a decision that’s very important in neuro-scientific investment and financing firm. The financial manager can be responsible for the economical sector in a firm.
Understanding Functions and Goals of Financial Management. Explanation of Financial Management
Financial management can be any activity or actions of the business related to how exactly to obtain working capital funding, employ or allocate, and manage resources to attain the main objectives of the business.
Objectives of Financial Management
The primary objective of Financial Control is to increase the value of the business or provide added worth to the resources owned by shareholders.
Scope of Financial Management
Scope of Financial Control consists of:
Funding decision, including control guidelines in the search company’s funds, such as for example policies issued a variety of bonds and debt insurance plan short and very long term firm sourced from inner and external.
Investment Decision, Policy capital raising investment to fixed resources or Fixed Assets such as for example buildings, land and tools or machinery, in addition to financial assets by means of securities such as shares and bonds or activity to purchase various assets.
Decisions Asset Management, resources management policy efficiently to accomplish its goals.
Financial Management Function
The primary function of Financial Control are the following:
Planning or Financial Preparation, CASHFLOW Planning covers and Profits.
Budgeting or finances, reception planning and finances allocation successfully and maximize cost-owned money.
Managing or Financial Control, analysis and improvement of funds and financial systems.
Auditing or Audit, inner audit for the economical companies to adhere to existing guidelines and accounting standards to avoid deviation.
Reporting or Financial Reporting, provide information information about the business’s financial state and ratio research of financial statements.
Financial Ratio Analysis
The analysis tool that’s often used to look for the condition and financial functionality of the business. Benchmark commonly by comparing the boost or reduction in achievement between your two statements of budget at two specific time frame.
Financial Ratio Analysis typically used are grouped the following:
Liquidity Ratio, the ratio for assessing the business’s capability to meet all obligations for a while. Reports by means of analysis and Functioning Capital Recent Ratio to Total Resources (WCTAR).
Leverage Ratio, the ratio to measure the extent of the money supplied by the shareholders or owner in comparison with funds attained from loans from the lenders. Reports by means of Total Debt to Resources (DAR), Total Debts to Equity (DER).
Activity Ratio, this ratio can be used to gauge the effectiveness of control in the usage of its resources. All of the activity ratio consists of a comparison between your degree of sales and investments in a variety of types of assets. Research report by means of Total Asset START (ATO), Working Capital START (WCTO), Total Collateral to Total Resources (EA).
Rentability Ratio, this ratio can be used to measure the effectiveness of control as found from the revenue generated on product sales and investment firms. The report analyzes the proper execution of Return on Collateral (ROE), Return on Resources (ROA), Earning Ability of to Total Purchase (EPTI), Gross PROFIT PERCENTAGE (GPM), and Operating Profits (OI).