For a successful organisation, financial management is one of the very important factors, which determines the present and future state of the institution/organisation. A company without proper financial management skill will lead to a very big failure. A company’s growth depends only on its financial management skills.
What is Financial Management?
It is the process of planning, managing and controlling the financial activities of a company. Simply financial management means applying the general management principles like generating, calculating, and financial resources of the company. Taking decisions is another important factor in financial management skill. There are three main types of decision elements are there in financial management skills. They are
- Investment decision
- Financial decision
- Dividend decision
It is also called as capital budgeting. It is very important to know, that where you are investing.
Investing in your own company as well as in another publicly-traded company can also determine your value and capital management skill
This depends on three main factors, they are a) cost of financing, b) period of financing and c) return. Even though you are investing in a well-reputed company. It is very essential to analyze the above three financial decision factors before investing.
Dividend decision is also called as net profit distribution. Simply saying, a dividend share value of the company tells exactly about the company’s stage. A good dividend and earnings per share value show the company growth. So before investing in a publicly-traded company, it is very important to notice its previous dividend and earnings per share value.
Main Objectives of Financial Management
- Make sure that the adequate and the regular amount of funds are being transferred and rotated among the concerns.
- Optimize the fund utilization. Once the funds produced, make sure they are being used I a proper way with a minimal amount of cost.
- Make sure that you are investing in a safe and secure environment to avoid unexpected loss. Also in this way, some adequate rate of return money can be achieved.
Financial planning takes a major role in an organization/ company but also for every part of life. Everyone should know the value of money, keep it safe, invest it safe by financial management skills. Financial planning will help to prevent the unpredictable losses, and thus but increasing the stability and profitability of the company.