Scribd
Upload
19 views1 page

Financial Management Objectives & Scope

The document summarizes the nature, purpose, and scope of financial management. Financial management involves planning, acquiring, and utilizing funds to achieve organizational goals in an efficient manner. The objectives of financial management include ensuring adequate funding, returns for shareholders, optimal fund utilization, and investment safety. The scope of financial management encompasses estimating financial requirements, deciding capital structure, selecting financing sources and investments, cash management, financial controls, and utilizing surpluses. Key roles of financial managers include making investment, operating, and financing decisions.

Uploaded by

Rae Works
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
19 views1 page

Financial Management Objectives & Scope

The document summarizes the nature, purpose, and scope of financial management. Financial management involves planning, acquiring, and utilizing funds to achieve organizational goals in an efficient manner. The objectives of financial management include ensuring adequate funding, returns for shareholders, optimal fund utilization, and investment safety. The scope of financial management encompasses estimating financial requirements, deciding capital structure, selecting financing sources and investments, cash management, financial controls, and utilizing surpluses. Key roles of financial managers include making investment, operating, and financing decisions.

Uploaded by

Rae Works
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

STRACOSMAN: STRATEGIC COST MANAGEMENT

CHAPTER 5: Objectives and Scope of Financial Management


SUMMARY NOTES BY: Mary Joy C. Nala, CB
BS ACCOUNTANCY 3B | 2nd SEMESTER A.Y. 2022-2023

Nature, Purpose and Scope of Financial Management 1. Investment Decision


2. Financing Decision
Financial Management 3. Dividend Decision
It is a decision-making process concerned with 4. Working Capital Decision
planning, acquiring, and utilizing funds in a
NATURE manner that achieves the firm’s desired goals. ROLE OF FINANCIAL MANAGERS IN INVESTMENT,
It is the process of planning decisions in order OPERATING AND FINANCING DECISIONS
to maximize wealth.
Refers to the efficient and effective 1. INVESTMENT / CAPITAL BUDGETING
management of money (funds) in such a DECISIONS
manner as to accomplish the objectives of the - One of the most important finance functions is
organization. It is the specialized function to intelligently allocate capital to long term
directly associated with the top management. assets. This activity is also known as capital
budgeting. It is important to allocate capital in
Objectives of Financial Management those long-term assets so as to get maximum
yield in future. Following are the two aspects
The financial management is generally of investment decision
concerned with procurement, allocation and a. Evaluation of new investment in terms of
control of financial resources of a concern. profitability
The objectives can be- b. Comparison of cut off rate against new
investment and prevailing investment.
1. To ensure regular and adequate
PURPOSE supply of funds to the concern. 2. OPERATING DECISIONS
2. To ensure adequate returns to the - A more routine or schedule form of decision.
shareholders which will depend upon the Examples are determination of the amount of
earning capacity, market price of the share, inventories, cash and account receivables to hold
expectations of the shareholders. within a certain period.
3. To ensure optimum funds utilization. - Asset management is one of the main aspects for
Once the funds are procured, they should be a company to adequately meet its obligations and
utilized in maximum possible way at least cost. in turn to position itself to meet the objectives or
4. To ensure safety on investment, i.e, growth targets that have been laid out.
funds should be invested in safe ventures so
that adequate rate of return can be achieved. 3. FINANCING DECISIONS
5. To plan a sound capital structure- - All functions of a company need to be paid for one
There should be sound and fair composition of way or another. It is up to the finance department
capital so that a balance is maintained to figure out how to pay for them through the
between debt and equity capital. process of financing.
The main objective of financial management is - There are two ways to finance an investment:
to arrange sufficient finance for meeting short- using a company's own money or by raising money
term and long-term needs. With these things from external funders.
in mind, a Financial Manager will have to
concentrate on the following areas of finance
function.
1. Estimating Financial Requirements
2. Deciding Capital Structure
SCOPE 3. Selecting a Source of Finance
4. Selecting a pattern of investment
5. Proper Cash Management
6. Implementing Financial Controls
7. Proper Use of Surpluses

Some of the major scopes of financial


management are as follows:

SUMMARY NOTES
Prof. Rica M. Quitoriano BSA 3B

You might also like