Search Definition of risk management Risk management is the process of identifying, quantifying, and managing the risks that an organisation faces. As the outcomes of business activities are uncertain, they are said to have some element of risk.
Definition, Aims, Scope and Functions Article shared by: Definition, Aims, Scope and Functions! Financial Management is a related aspect of finance function. In the Defination of financial management business administration financial management is an important branch.
Nobody will think over about-business activity without finance implication. Financial management includes adoption of general management principles for financial implementation. The following may be said as the related aspects of financial management raising of funds, using of these funds profitably, planning of future activities, controlling of present implementations and future developments with the help of financial accounting, cost accounting, budgeting and statistics.
It acts as guidance where more opportunities for investment is available. Financial management is useful as a tool for allotment of resources to various projects depending on their importance and repayment capacity. James Van Morne defines Financial Management as follows: Financial managements can be said a good guide for allotment of future resources of an organisation.
Preparing and implementation of some plans can be said as financial management. In other words, collection of funds and their effective utilisation for efficient running of and organization is called financial management. Financial management has influence on all activities of an organisation. Hence it can be said as an important one.
Its main responsibility is to complete the finance function successfully. It also has relations with other business functions. All business decisions also have financial implications.
However, financial management shall not be considered as the profit extracting device.
If finance is properly utilised through plans, they lead to profits. All these are facts. But this is not complete.
The implication of financial management is not only attaining efficiency and getting profits but also maximising the value of the firm. It facilitates to protect the interests of various classes of people related to the firm. Hence, managing a firm for profit maximisation is not the meaning for financial management.
Financial management is applicable to all kinds of organisations. Aims of Financial Management: For this purpose increase of sales volume or other activities can be taken up.
It is the general feature of any firm to increase profits by proper utilisation of all opportunities and plans. Theoretically, firm gets maximum profits if it is under equilibrium. At that stage the average cost is minimal and the marginal cost and the marginal revenues are equal.
Further, the above costs must also be controlled. Capital and equity funds are utilised for production. It should be decided by keeping in view the value of the firm to collect funds through issue of shares or debentures.
But for this reason if more risk is taken, it may become danger to the existence of the firm. Hence risk should be reduced to minimum level. It should be the feature of financial management to increase the long-run value of the firm.
To earn more profits in short time, some firms may do the activities like releasing of low quality goods, neglecting the interests of consumers and employees. These trials may give good results in the short run. But for increasing the value of the firm in the long run, avoiding; such activities are more essential.
Scope and functions of financial management: The scope of financial management includes three groups. First — relating to finance and cash, second — rising of fund and their administration, third — along with the activities of rising funds, these are part and parcel of total management, Isra Salomon felt that in view of funds utilisation third group has wider scope.
It can be said that all activities done by a finance officer are under the purview of financial management. But the activities of these officers change from firm to firm, it become difficult to say the scope of finance.An understanding of why exchange rates move up and down is essential for successful financial management in an international environment.
ADVERTISEMENTS: Financial Management: it’s Definition, Meaning and Objectives! Definition: One needs money to make money. Finance is the life-blood of business and there must be a continuous flow of funds in and out of a business enterprise.
Money makes the wheels of business run smoothly. Accounts receivable are a completely different part of the credit column for many companies, and receivables management practices help keep track of them. Treasury management (or treasury operations) includes management of an enterprise's holdings, with the ultimate goal of managing the firm's liquidity and mitigating its operational, financial and reputational risk.
Treasury Management includes a firm's collections, disbursements, concentration, investment and funding activities. In larger . Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise.
It means applying general management principles to financial resources of the enterprise. Risk management is the process of identifying, quantifying, and managing the risks that an organisation faces.
As the outcomes of business activities are uncertain, they are said to have some element of risk.