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Financial Management

Finance is the life blood of business. Without finance, the heart and brain of business cannot function implying thereby its natural death. Right from conceiving the idea of birth of a business to its liquidation, finance is required. Inputs are made available only with finance. Even managerial ability can be had with only finance. So, finance is the pivot around which the whole business operations cluster. Therefore, there is an imperative need to efficiently manage the finance of a company. Actually, sometimes, it is not the inadequate finance that is the cause of failure of a business but the mismanagement of sources which is ultimately responsible for it. The survival and growth of a firm is possible only if it utilizes its funds in an optimum manner. Collin Brooks has rightly remarked in this context that “bad production management and bad sales management have slain their hundreds, but faulty finance has slain its thousands.” Therefore, sound finance management is indispensable in a corporate organisation.

The major functions of management are in the areas of production and marketing and the performance of both these functions require funds. Profitable carrying out of production and marketing functions becomes possible if the management if finances are efficient and effective. Efficient and effective management of funds enables the firm to prosper and grow. It is, therefore, correct to say that, “without adequate finance no business can survive and without efficient financial management no business can prosper and grow.”

Financial management is one of the functional areas of management. It pertains to the management of finance. Of late, the finance function has become more important and has been most important function of focus by the management on account of changing scenario of global business environment. With finance gaining more relevance in decision making by the management, the overall managerial strategy has become finance driven.

Financial management is the application of managerial functions of planning and control to the finance function. The finance function is the function of management in performing financing, investment and dividend decisions. Thus, financial management deals with the functions relating to financing, investment and dividend policy decisions.