YOGYAKARTA - If you ask what is the purpose of financial management? means planning, regulating, directing and controlling financial activities such as the procurement and use of company funds. This means applying the principles of general management for company financial resources.
Financial management is generally related to the procurement, allocation and control of financial resources that are of concern. The goal could be-
Scope/Element of Financial Management
Function of Financial Management
1. Estimation of capital needs: Financial managers must optimize the company's capital needs. This will depend on the expected costs and profits as well as future programs and policies that are of concern. Estimacy must be made in an adequate way that increases the company's income capacity.
2. Determination of capital composition: After the estimated, the capital structure must be decided. This involves analysis of short-term and long-term debt equity. This will depend on the proportion of equity capital owned by the company and additional funds that must be collected from outside parties.
3. Fund source options: For additional funds to be obtained, the company has many options such as-
4. Investment funds: The financial manager must decide to allocate funds to profitable businesses so that there is security in investment and regular returns are possible.
5. Disposal of the surplus: A net profit decision must be made by the financial manager. This can be done in two ways:
6. Cash management: Financial managers must make decisions related to cash management. Cash is needed for various purposes such as payment of wages and salaries, payment of electricity and water bills, payment to creditors, fulfillment of smooth obligations, maintenance of sufficient supplies, purchase of raw materials, etc.
7. Financial control: Financial managers not only have to plan, obtain and utilize funds but they must also control over finances. This can be done through many techniques such as ratio analysis, financial forecasting, cost control and profit, etc.
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