In this video, you will learn What is Financial Management. What are the functions of Financial Management.
Hey leonards welcome back to my channel today’s video is going to be on financial management before we start the video it’s a humble request that please subscribe to my channel so that you will always get the notification and i will be motivated to make more and more videos like this now without wasting more time let’s come to the video financial management covers
All decisions taken by an individual or a business firm which have financial implications in our simple understanding finance perceives as money where where to invest our money how to use the money effectively we understand it is very important to understand where we are going to utilize our money how we are going to utilize our money in which investment project we
Are investing so that the risk will be less and the profit will be more or we can get a good revenue out of our investment so here financial management plays a very important role financial management is the composition of two words finance and management finance means the science or study of money and its supply it’s a way through which any business firm raise
Their fund raise their money and use their money in an effective way they buy the resources and try to make a profit at the end out of those funds so here finance not only provide you the information about your money but help you to evaluate all the situations and according to that it help you to invest properly and safely in any fund in any project so that you
Can make good revenue out of that investment you can make a bid profit out of your investment the word management means planning organizing coordinating and controlling human activities with reference to finance function for achieving goals and objective of the organization thus financial management is defined as the overall administration and management of money
And its flow here management help any organization to or any individual to understand where the money is going how we can control the flow of our money how we can reduce the risk and how we can invest in a better way so that the objective could be achieved and where our money is going how our money is flowing we can have a good analysis and we can have a good
Control over our money so that at the end we don’t make a loss we always get a good revenue out of our investment here in this diagram we can see financial management contain activities such as planning organizing coordinating and controlling of the funds and using those funds in a way so that they can know from where the funds are coming where their funds are
Getting invested and how their funds are getting distributed so that at the end they could achieve their organization goal and they can generate the revenue now after understanding what is financial management we will see functions of financial management in functions of financial management first we have estimation of capital requirement here in this function we
Try to understand how much money we needed to start our project how much money we needed to buy the resources how much money we needed to um to start doing our production process and so on so here we completely analyze how much money we need to accomplish our organization objective okay second comes determination of capital composition in this function we try to
Figure out if we needed more money than from where we can raise more money either we can take from bank or either we can take from public but we in this function we try to figure out if we are borrowing money from other person then we needed to borrow money for short term or for long term because short term have different interest rate and long term have different
Interest rate okay so it is important to figure out if we need the money to take from others then what kind of is it going to be short term or is it going to be long term according to that we decide which institution or which sort of funds or sources of funds we have to select so a third function comes choice of sources of fund once we know how much money we
Need then how much money we are having and how much more money we needed from outside third function comes to choose if we need money from outside then there are certain sources of fund from where we can withdraw the money like we can issue share and debentures we can take loan from banks we can ask for public deposits and so on so here we have to figure out
Which one we needed which one we can provide and according to that we can choose our sources of fund next point comes investment of funds the financial manager has to decide to allocate funds into profitable venture so that there is safety on investment and regular returns is possible okay the next function of financial management is financial management provide
Any individual if an individual is investing into any project then it help them to understand what are the safe zones okay when you are investing in any project then which funds is going to give you a safety which funds is going to help you to generate revenue at the end um if you go for a share or if you buy the equity or you buy any share of the company then
It’s risky maybe the company make profit maybe the company make losses if the company make profit of course you will get a good interest rate but if the company is going to get lost then you will lose your money so here it is very important to choose such a such a fun where you are going to invest and out of your investment you should get a profit okay so here
Investment of fund uh tell us about the safe and unsafe funds okay save funds which will provide you less interest but at least you know that your money is safe and even if the company is going to be in loss you are going to recover your money but in risky funds it’s more like you will if the company is blowing if the company is making profit you are going to get
Your very good return out of it but if the company is making loss you are going to lose your money because you are not going to get anything so here uh if we talk about investment of fund this function says which one is safer um if we keep our money in risky funds like share equity share share market so if if we are uh investing on shares then our money will be on
Risky side but if we are putting our money on uh preferences or even in dividend or any kind of bond so in this way our money or our fund is safe even if the company is making loss we can hope to get our money back so this function tell us about that fifth point we have disposal of surplus the net profit decision have to be made by finance manager this can be done
In two ways first dividend declaration which include identifying the rate of dividend and other benefits like bonus whereas retained profit the volume has to be decided which will depend upon expansional interventional diversification plan of the company so here we can conclude if a company has made a profit then here financial management take those surplus and
They analyze where they have to uh use the surplus either they can give their give bonus to their employee or to the investors who has invested in their project so that the company reputation could increase and in the future people can invest more and more money or they can use those fund into uh betterment of their company or they can do some diversification
Or intervention or they can use it for expansion of their business so in this way a financial manager get the help of financial management to take such decisions sixth point we have management of cash finance manager has to make decisions with regard to cash management cash is required for many purpose like payment of wages and salaries payment of electricity
Bills water bills payment to creditors meeting current liabilities maintenance of enough stock purchase of raw material etc so here we can conclude our financial management provide the information to the manager or guide how to use the fund or the money of the company to fulfill the requirements related to some important issues like paying the bills gathering
The resources buying the resources paying the company taxes and so on seventh point we have financial controls the finance manager has not only to plan procure and utilize the fund but he also has to exercise control over finance this can be done through many techniques like ratio analysis financial forecasting cost and profit control etc so here we can say a
Financial management guide a financial manager or help a financial manager to control the flow of fund in an effective way how a manager can reduce the prices where they can cut the prices or how they can put the prices in a effective way if they are making or investing in certain projects or if they are buying the resources he need to be analyzed properly he
Need to analyze how much money he should invest on the resources or how much money he should invest in other places because if all the money he will invest on the resources then how uh in any organization can pay the money to the employee or how they can be a electricity bill or any other thing so a manager finance manager have to look ahead about every single
Situation related to this resources related to employee salary related to the benefits given to the investors everything he needed to analyze and according to that he have to take financial decisions so here in this video we have understand what is financial management and we have seen the functions of financial management i hope this video was helpful for you
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Transcribed from video
What is Financial Management. What are the functions of Financial Management By Management Adda
