Meaning of Finance Management
Finance Management suggests that coming up with, organizing, directive and dominant the monetary activities like procurance and utilization of funds of the enterprise. It suggests that applying general management principles to the monetary resources of the enterprise.
Investment choices include investment in fastened assets (called capital budgeting). Investment in current assets also is a district of investment choices known as capital choices.
They relate to the raising of finance from varied resources which is able to rely upon call on sort of supply, amount of finance, price of finance and therefore the returns thereby.
The finance manager should take a call with regards to net profit distribution. internet profits are typically divided into two:
Dividend for shareholders
Dividend and therefore the rate of it’s to be set.
the number of maintained profits should be finalized which is able to rely upon growth and diversification plans of the enterprise.
Objectives of economic Management
The monetary management is usually involved with procurance, allocation, and management of economic resources of a priority. The objectives will be-
To ensure regular and adequate provision of funds to the priority.
Ensure adequate returns to the shareholders who are able to rely upon the earning capability, the market value of the share, expectations of the shareholders.
To ensure optimum funds utilization. Once the funds are procured, they ought to be used in most doable means a minimum price.
To ensure safety on investment, i.e, funds ought to be invested within safe ventures in order that an adequate rate of come is often achieved.
Set up a sound capital structure-There ought to be the sound and truthful composition of capital in order that a balance is maintained between debt and equity capital.
Functions of economic Management
Estimation of capital necessities: A finance manager should build estimation with regards to the capital requirements of the corporate. this can rely upon expected prices and profits and future programs and policies of a priority. Estimations ought to be created in an associate degree adequate manner that will increase the earning capability of the enterprise.
Determination of capital composition: Once the estimation is created, the capital structure ought to be set. This involves short- term and long- term debt equity analysis. this can rely upon the proportion of equity capital a corporation is possessing and extra funds that ought to be raised from outside parties.
Choice of sources of funds: for added funds to be procured, a corporation has several selections like
- Issue of shares and debentures
- Loans to be taken from banks and monetary establishments
- Public deposits to be drawn like in sort of bonds.
- The choice of issue can rely on relative deserves and demerits of every supply and amount of finance.
Investment of funds
The finance manager should commit to apportion funds into profitable ventures in order that there’s safety on investment and regular returns are feasible.
Disposal of surplus
net profits calls ought to be created by the finance manager. this could be worn out 2 ways:
Dividend declaration – It includes characteristic the speed of dividends and different edges like a bonus.
Retained profits – the quantity should be set which is able to rely upon expansion, innovative, diversification plans of the corporate.
Management of money
The finance manager should build choices with regard to cash management. money is needed for several functions like payment of wages and salaries, payment of electricity and water bills, payment to creditors, meeting current liabilities, maintenance of enough stock, purchase of raw materials, etc.
The finance manager has not solely to set up, procure and utilize the funds however he conjointly should exercise management over finances. this could be done through several techniques like quantitative relation analysis, monetary foretelling, price and profit management, etc.