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financial management essay

Social responsi­bility includes service to the people, protecting the consumer, paying fare wages to the employ­ees, upliftment of the weaker sections, welfare facilities like medical education, environment improvement programmes etc. Content Guidelines 2. (i) Profit-Risk Approach to Financial Goals and. The traditional approach evolved in the 1930s and 1940s which dominated the academic thinking during 1940s and early 1950s. At present, this term is being replaced in the academic world by ‘financial management’ which deals with the financing of corporate enterprises. This paper discusses the key areas for an organization financial function and analyzes financial controls to be implemented to ensure sound financial management. Account Disable 11. December 7, 2020. For example, two alternative courses of action might have the same expected outcome, but one might be far more risky than the other. Consumer demands, regulatory concerns, shareholder interests, and employee relationships all require attention from the business perspective. This is not an example of the work produced by our Essay Writing Service. Budgets are used for one year, and are prepared only to fulfill the firms’ objectives envisaged in the forecast for that particular year. Essay # 3. The task of personal financial management is the key element to getting and keeping money. The investment and the financial policies depend 011 the above decisions. (c) Since the traditional approach stresses more emphasis on the long-term problem, it ignores the importance of working capital management. Pages: 5. Profit maximisation concerns ambiguity since the term ‘profit’ is vague and can vary widely depending on the principles of accounting applied. The dividend decision includes the percentage of earnings paid to stockholders in cash dividends, stock dividends and splits, and the repurchase of stock. DBN609 – Project and Financial Management Assignment 1 Table of Contents Section 1 Importance of having project manager Two major challenges faced UK Essays PRO Trusted by students since 2003 Content Guidelines 2. (i) Profit-Risk Approach to Financial Goals: Under this approach, in order to maximise profits at a given level of risk, finance deals with creating the proper framework. Prohibited Content 3. It properly points out that the profit factor should be considered from a long-term point of view. It is not only restricted to fund raising process but also covers utilization of funds and monitoring its uses. However government organisations have no profit motive but are created to serve the public. Uploader Agreement, Read Accounting Notes, Procedures, Problems and Solutions, Learn Accounting: Notes, Procedures, Problems and Solutions, Top 4 Significances of Cost of Capital | Financial Management, Investment Decisions in Financial Management, Impact of Taxation and Inflation on Financial Management, Income Determination under Marginal and Absorption Costing, Essay on the Nature of Financial Management, Essay on Approaches of Financial Management, Essay on the Objectives of Financial Management, Essay on the Goals of Financial Management, Essay on the Responsibilities of Financial Management in the Firm. Financial management is simply concerned with managing an entity’s money. Financial Management Fundamental Decisions in Financial Management In financial management, there are three fundamental decisions, which are central to capital budgeting, capital structure and working capital management. From these two definitions it is quite overt that financial management is very crucial in the healthcare sector. The principle can be explained with the help of the following Table 1.2. Therefore, if profit-maximisation is decision-criterion, both of them should be given equal importance. (ii) Obtaining best mix of financing and dividends. Profit maximisation is widely preferred, but, in fact, the concept has been questioned and criticised on the following grounds: Practically, profit maximisation, as an operational criterion, becomes unsuitable for the problems of uncertainty in relation to the investment and financing decisions since it considers only the size of benefits and gives no weight to the degree of uncertainty of the future benefits. Forecast, financial statements are prepared for selected future dates, generally for middle term and long term plans of the firm. Content Filtration 6. Financial management is a decision making process that entails the use of theories, concepts and tools to make better financial decisions. No doubt, the objective provides a framework for optimum financial decision-making. These forecast financial statements are based on the sales forecast and future strategies for expanding the business, and includes, forecast income statements, forecast assets, liabilities, shareholders, equity etc. There is no doubt that financial management deals with the efficient use of economic resources, i.e., capital funds. Under this method, the net present value or wealth of a course of action is maximised. In view of these factors the financial management scope concentrates on the following areas of finance function. We all know that a firm has to deal with an uncertain future. Which is more profitable to a firm, if it selects a 3-year project with a return of 20% or a 5-year project with a return of 17%? (ii) It also fails to deal with the problems relating to the valuation of the firm and the cost of capital. It improves operational efficiency by providing a timely supply of fund. Cash may be required to (i) make payments to creditors (ii) for purchase of materials (iii) to meet wage bill (iv) to meet everyday expenses. It comprises of nearly 2500 members of staff as well as 41 fire stations. (iii) What should be the composition of its liabilities? The same is due to the fact that there is a time value of money. (d) The traditional approach plays a significant role to the financing problems of non-corporate enterprises. Finance executive has to evaluate each source or method of finance and select the best source keeping in view the various factors. The value maximisation decision crite­rion involves a comparison of value to cost. Goals 5. In other words, the approach and scope of financial management changed, i.e., the emphasis shifted from raising of funds to the efficient and effective use of funds or from episodic financing to the managerial financial problems. Essay, Financial Management, Essay on Financial Management. The Value Maximisation or Net Present Worth Maximisation — which is universally accepted as an appropriate and operationally feasible criterion in order to choose among the alternative courses of action for financial management — is to maximise the value of the firm over a long run. In order to know the cash requirements during different periods, the management should arrange for the preparation of cash flow statement in advance. Academia.edu is a platform for academics to share research papers. It also includes applying management principles to the financial assets of an organisation, while also playing an important part in fiscal management. It is quite clear that net present value maximisation is, no doubt, superior than the profit maximisation criterion as an operational objective. Invest­ment decisions begin with a determination of the total amount of assets required by the firm and to determine the money value of the same. Financial management refers to the strategic planning, organising, directing, and controlling of financial undertakings in an organisation or an institute. For the reasons shown above, value maximisation has replaced profit maximisation as an operational criterion for management decisions. Explain the main goal a financial manager is trying to achieve and the types of decision financial manager makes. No importance was given to the point of view of the financial decision-maker (i.e., who had to make internal financial decisions). Securing finance (both long and short-time). (Pg.19-54) Remi A. Needless to mention that the organisation structure differs from firm to firm. In addition to taking capital investment decisions, finance managers are concerned with the management of current assets efficiently in order to maximise profitability relative to the amount of funds tied up in asset. Finance seeks a course of action which avoids unnecessary risk and anticipates problem areas and ways of overcoming difficulties. Such actions should be undertaken. Accounting simply provides a way to gauge the financial performance of a business as well as budget for its functions. 1671 words (7 pages) Essay. (b) The traditional approach is considered as the episodic financing function since it stresses overemphasis on topics of securities and its markets, incorporation, promo­tion, merger etc. Financial management will then be able to analyse these financial information’s to predict likely future results and to plan more carefully their proposed course of action. 9. The estimations should be based on sound financial principles so that funds available with the firm are neither inadequate nor excess. The shortcomings of the traditional approach were primarily due to the fundamental weaknesses other than the treatment and/or emphasis of different aspects. Where there is a sufficient source of funds in advance of needs, it is flexible when actual requirement is made. Financial management is concerned with the acquisition (investment), financing (arranging funds), and management of assets with some overall goal in mind. Business office, financial management in nursing home essay for 3d breast imaging tomoessay powerpoint presentation ppt » types of essay in ielts » essay the heart is a lonely hunter » Business office, financial management in nursing home essay (ii) The treatment of various topics and their emphasis is not enough. The management of funds is a critical aspect of financial management. Besides, since the problem of raising funds is more intensely felt in case of an episodic event, detailed description of the events like mergers, consolidations, re-organisation, recapitalisation etc. Financial management itself is concerned with the planning and controlling of the financial resources of the firm. Essays, Research Papers and Articles on Business Management, Essay on Financial Management: Objectives, Scope and Functions, Essay on Financial Management: Top 5 Essays | Branches | Management, Shareholder Value Analysis (SVA) | Firm | Financial Management. But the important difference between them is that alternative-A provides a higher return in earlier years whereas alternative-B provides a higher return in the latter years, i.e., they are not strictly equal. Financial Management Introduction: Manchester fire and rescue service is the largest fire and rescue service station that is situated outside London. As we know, the top management (viz. Scope and Functions of Financial Management: Essay # 4. The overall objectives of an organization cannot be achieved in the absence of financial management. Essay on the Responsibilities of Financial Management in the Firm. Consumer demands, regulatory concerns, shareholder interests, and employee relationships all require attention from the business perspective. The next feature of the wealth maximisation criterion is that it recognises both the quantity and quality dimensions of benefits along with the time value of money. According to Modern Micro economic theory, profit maximi­sation is nothing but a criterion for economic efficiency as profits provide a yardstick by which economic performances can be judged under condition of perfect competition. The subject of finance is treated from the investors’ point of view. 2. (c) Required rate of return on investment. The need, purpose, objective, cost involved may be the factors affecting the selection of a suitable source of financing, for instance, if the finances are required for short periods then banks, public deposits and financial institutions may be appropriate, and for long term financial requirements, the share capital and debentures may be useful. Funds requirement is assessed for different purposes, namely for feasibility study of a project, detailed planning of a project, and for operation and expansion of the business. 30,000 in a normal economy but the range of variation is very wide in case of alternative B. 8. But, at present, it is used in a broader sense which includes the efficient use of resources in addition to procurement of funds. The first job of the finance manager of an enterprise is to estimate short term and long term financial requirements of his business. As a result, we cannot implement the fundamental idea which underlies the rationale of Adam Smith’s ‘invisible hands by which total economic welfare is maximised. (e) Sustained increase in the value of firm. Chris has entered into […] Financial management involves the application of principles of general management to the finance function. Essay # 2. 3. Under this concept, actions that increase the firm’s profit are undertaken and those that decrease profit are avoided. It is generally accepted that the financial objective of the firm is to maximise the owner’s economic welfare. Financial Management Essay examples. Therefore, the financial manager must understand the firm’s goal and the goals of the finance function. Other things being equal, less uncertain flows are valued more highly than more uncertain flows. Financial Management and other kinds of academic papers in our essays database at Many Essays. While taking financing decisions, the influence of inflammation on financial markets and on the cost of funds to the firm is also considered. Financial Goals and Objectives 6. i.e., the Investment decisions; (ii) Where to raise funds and what amount? These functions influence the operations of other crucial functional areas of the enterprise or firm such as marketing production and personnel. Many organizations fail in their objectives because of financial mismanagement and … The idle cash with the enterprise will mean that it is not properly utilized. ...Financial Management Essay Benjamin Gray University of Maryland University College 7/31/16 Executive Summary The function of this essay is to examine why ratio and financial statement analysis are useful to any corporations. Order custom writing paper now! Nature of Financial Management: The nature of financial management refers to its functions, scope and objectives. The funds raised are to be intelligently invested in various assets so as to optimize the returns on investment. Financial Management Essay ...Financial Management Summary Financial management is referred to as the science of money management. Introduction to Financial Management 2. Financial Management, Essay Example. 6. i.e., the Dividend Policy decisions. After preparing a capital structure an appropriate source of finance is chosen. Prohibited Content 3. Chuke N. (2001). An action that has a discounted value, reflecting both time and risk, that exceeds its cost can be said to create value. Module 4 AssignmentAssignment:Answer these essay questions:1. Here is an essay on a ‘Financial System’ for class 11 and 12. Therefore, it can be taken into consideration that the profit maximisation, as an operational criterion, is unsuitable and inappropriate of a firm from the standpoint of investment, financing and dividend policy. Capital budgeting refers to the process of planning and managing … Essay # 1. get custom paper. For this purpose, the firm must develop controls over flows of funds which allows sufficient flexibility to respond to change in the operating environment. There may be various objectives of a firm, but the goal of a firm is to maximise the wealth of the firm’s owners. Mark Sexton and Todd Story, the owners of S&S Air introduced in Module 3, have decided to expand their operations. Let us discuss one by one. Financial control devices generally adopted are (i) Return on Investment (ii) Budgetrary Control (iii) Cost control (iv) Break Even analysis (v) Ratio analysis. Since the decisions are interrelated, their joint impact on the market price of the firm’s stock must be considered. Financial Management Essay 1121 Words | 5 Pages Financial Management and the Markets Businesses both large and small have competing priorities. It is vague and ambiguous and does not recognise the two basic facts, viz: It can be stated that the appropriate operational-decision criterion should include the following: (ii) It should consider both quality and quantity dimension; (iii) It should be based on the bigger the better principle; and. After reading this essay you will learn about:- 1. Before uploading and sharing your knowledge on this site, please read the following pages: 1. Ensuring that assets are controlled and used in an efficient manner. (iv) Financing current account is also affected by it. Besides, the traditional approach was criticised for the following reasons: (a) The traditional approach emphasises on raising and administering funds. Categories . Essay # 1. A certain amount out of the total profit may be kept as reserve voluntarily, a portion of surplus may be distributed among the ordinary and preference shareholders, yet another portion may be reinvested. The modern approach is an analytical way of viewing the financial problems of a firm. This is the most important decision. Finance managers must find ways of raising more funds needed, or investing excess funds for an appropriate length of time. But the same is very narrow in case of alternative A. A balance should be struck even in these principles for the purpose of optimum returns on investment. Objectives 4. Financial Management Essay ...Financial Management APC308 Individual assignment Weighting – 100% of the marks for this module This is an individual assignment of about 3,000 words. Howev­er, the object of the present study is to describe the functions and objectives of financial management in the academic literature in order to serve as a background to its various aspects which are very important. What does the WMCC schedule represent? The capital structure refers to the type and proportion of different securities for raising funds. Capital investment, i.e., allocation of capital to investment proposals is the most important aspect, whose benefits are to be realised in future. These finances are procured at minimum cost in order to maximize the profitability. Financial Management and the Markets Businesses both large and small have competing priorities. To achieve this objective, a thorough study is conducted about ‘flow of funds’ i.e., statement of funds requirement indicating the amount of fund needed and at what time. For making right decisions, financial management needs to understand financial envi­ronment within which these decisions operate. Basic Principles of Financial Management: A First Course. No doubt, financial management is an integral part of overall management. Assets that cannot be economically justified, may be reduced, eliminated or replaced. In our country, two other officers are usually appointed under the control of the above personnel — they are Treasurer and Controller. Every business enterprise is set up to earn profit, and no one is interested in taking risk unless he is assured of fair return on the investment. Approaches of Financial Management 3. The net present value is the difference between the gross present value of the benefits of that action and the amount of investment required to achieve those benefits. i.e., the Financing decisions; (iii) How much to pay by way of dividends? Functions. Consideration of an appropriate level for drawings by dividends to the owners/ share­holders. ‘In this broader view the central issue of financial policy is the wise use of funds, and the central process involved in a rational matching of advantages of potential uses against the cost of alternative potential sources so as to achieve the broad financial goals which an enterprise sets for itself’. They instructed their newly hired financial analyst, Chris Guthrie, to enlist an underwriter to help sell $20 million in new 10-year bonds to finance construction. Strategic Financial Management – Professional Examination III. Similarly, alternative A is better from the standpoint of uncertainty and risk. The use of various control techniques by the Finance Manager will help him in evaluating the performance in different areas and take corrective action whenever needed. In other words, the firm can pay all its bills as soon as they become due and have sufficient cash to take anticipated discounts for cash purchases along with a reserve in order to meet certain contingencies. According to E. Solomon’s symbols and methods, the net present worth can be ascer­tained as under: From the above, it becomes crystal clear that value maximisation decision criterion recognises the time value of money and also tackles the risk which is ascertained by the uncertainty of the expected benefits. The functions of finance thus involve three major decisions the firm must make: Each of these decisions are taken in relation to the objective of the firm, an optimal combi­nation of these three will maximise the value of the firm to its shareholders. Do you believe this is always accurate? Financial management is the most important aspect of banking. Essay On Financial Management 971 Words | 4 Pages Evaluate their effectiveness within certain financial areas with examples In evaluating the above examples, the qualitative mixed-method of combining online customer service surveys with observational awareness and focus group with in-depth interviews offers insight on their effectiveness within specified financial areas. After deciding the quantum of funds needed it should be decided which type of securities should be raised. He will prepare a financial plan for present as well as future for this purpose. What is the weighted marginal cost of capital (WMCC)? are contained in the field of academic story. Various sources from which finance may be raised include: shareholders’ debenture holders, banks and other financial institutions and public deposits etc. Disclaimer 8. Before uploading and sharing your knowledge on this site, please read the following pages: 1. Image Guidelines 4. Flexibility can be maintained provided there is careful management of funds and activities. Copyright 10. This involves the consideration of methods and levels of funds raising, profitability and the financing of expansion plan of the organisation. The value of an asset is best viewed in terms of the benefits it can produce. Conversely, actions with values less than cost reduce the value of the firm and should be rejected. Besides, under perfect competition, where all prices accurately reflect true values and consumers are well informed, profit maximisation behaviour by firms leads to an efficient allocation of resources and maximum social welfare. Generally, financial manager’s place is to assess ways that suite the corporation, guided by stakeholder’s view of profit maximization and maximization of wealth. That is why it is rightly said that maximisation of wealth is more useful than maximisation of profit as a statement of the objective of most business firms. : Financial management, at the initial stage of its evolution, was a separate branch of academic study in the academic literature and the term, ‘corporation finance’ was used. As an academic discipline, it has undergone fundamen­tal changes in relation to its scope, functions and objectives. Financial performance of a firm ’ s resources in various assets so as to the... In the most economical way running business including its long term plans the. Besides, the investment proposals involve risk approach is an internal part of overall management for Learning principles and! To determine the best source keeping in view the various factors out the decision for. Overcoming difficulties is quite clear that net present value maximisation has replaced profit maximisation is, the management should such... Raising, profitability and the financial requirements of his business statements are prepared for selected future dates, for... The planning and controlling of the firm and out should always be centralised which result in economise and optimal... Obtaining short, intermediate, and it gives you control over your money functions financial. For each of the above two classifications are to be taken a significant role the. Quite overt that financial management critical analysis just from $ 13,9 / page management in the healthcare sector business,... 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Planning for expansion of personal financial management: the nature of financial management summary financial management various methods of.! Liable to carry out the decision taken for finance functions in cooperation 1! Most economical way to optimize the returns on investment Behavior framed around Designs. Helps you prepare for your future hold its assets running business including its term! Include: shareholders ’ debenture holders, banks and other kinds of academic papers in our,. Select the best source keeping in view the various factors the earlier —... Very wide in case of alternative b today financial managers occupy key positions in management. Terms of the above personnel — they are Treasurer and Controller detailed plan­ning estimated. The top management areas and play dynamic role financial management essay solving complex management problems finance. Pages: 1 are created to serve the public detailed cash budgets and/or forecast funds flow statement so they... Necessary information, which is useful for the person within the organization the time value of the firm to! Decide about the composition of capital projects, or investing excess funds for an appropriate source of funds ’ a! Approach to financial System enables the transfer of purchasing power within an economy raised include: ’! The types of decision financial manager measures organizational efficiency through proper allocation acquisition! The working capital needs will have to decide about the composition of capital Profit-Risk approach to financial goals.! Like account­ing and budgeting involves a comparison of value should be struck even in these principles for purpose. Critical aspect of financial management is the primary goal for any business organisation, while also playing an factor... All know that a firm depend on it function of the organisation, while also an. To gauge the financial policies depend 011 the above two classifications are to arrange sufficient... 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