The Need For Finance Management For A Business

The Need For Finance Management For A Business

❑ For Starting Up- Depending on the type of business in terms of purchasing assets and employing people. ❑ Maintaining Working Capital- It needs to maintain the money for completing the short- term goals of the company. ❑ Acquisition- It requires to find money to pay for the acquisition

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The Scope Of Financial â?‘ The scope of financial management is Management divided into two broad categories:

â?‘ The traditional approach- This approach was popular in the early stage, it limits the role of financial management to raising funds needed by corporate enterprises to meet their financial needs. â?‘ Modern approach- This is the approach used by modern people, it provides the conceptual and analytical framework for financial decision- making 3

Major Decisions Regarding Financial Management? 

The financing decision- Quantum of finance to be raised for long- term sources.

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The investment decision- Decisions related to the firm’s funds are invested in different assets to earn the highest possible returns.

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The dividend decision- It is the portion of profit that is distributed to the shareholder.

The Importance Of Financial Management  It helps in forecasting what will happen in the future under distinct business situations.  It helps in ignoring business shocks.  It helps in coordinating with other business functions.

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What Is Working Capital? ❑ It is the investment that facilitates the smooth day to day business operations. ❑ It contributes less to the profits than fixed assets. ❑ It represents operation liquidity to the business or organisation. ❑ A company may be endowed with assets and profitability. ❑ Positive working capital is required to ensure that the firm can continue its operations under sufficient funds.

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