Wednesday 2 January 2019

Financial management | Basic | Functions | Objectives

Before we discuss more about financial management, we should know what is meant by the Treasury itself. Every organization, whether the Organization form of manufacturing companies, service companies, banks, schools, colleges or social foundation definitely need funds or money to run the day-to-day activities. Along with the business competition between organizations that increasingly tight, finance or the funds needed not only to sustain life but also to strengthen their own organizations. Some say that Fund or finance is the "blood" of a business.

Finance or Finance can be define as the way a person or an organization in improving, allocate and use monetary resources in line with the time and count the risks. The Finance can be defined as the position of the money at the time desired. Meanwhile, finance can be defined as the administrative area or set of administrative functions within an organization which deals with the management of the drift cash so that the Organization had the means to carry out its objectives as efficiently as possible and to fulfill their obligations that will be due.

So basically, finance is the art and science of managing money. A financial concept itself not only money but also include capital and funds that can be used in personal and business affairs. Also referred to as financial allowance money in times of need. Thus, studying the financial concept is not only important for an organization or company but it is also very important for our personal self.

Basic of Financial Management

 Once we understand the concept of financial, now we get into a discussion of financial management. Financial management or in the language of the United Kingdom called the Financial Management is the process of planning, organizing, directing and controlling the finances of such a procurement and utilization of the funds of the Organization to achieve goals his organization. According to Howard and Upton, financial management is the application of the general principle of managerial decision making in the areas of finance. Which is the financial management being all the company's activities related to efforts to get the company's funds and costs are cheap and effortless to use and allocate the funds These efficiently.

While the definition of financial management is business operations is responsible for acquiring and utilizing funds effectively to efficient business operations. Of the definition statement, constitute the main concern that financial management is how to manage funds effectively in a business. In a business organization, financial management that the so-called "practical in Corporation Finance" or "Business Finance".

The Scope of Financial Management (Financial Management Scopes)

  • Investment decisions (Investment Decisions), that includes investment on fixed assets (fixed assets) are usually referred to as Capital Budgeting and investments in assets smoothly (current assets) which is usually referred to as Working Capital (working capital).

  • Funding Decisions (Finance Decision), that the decision with regard to the increase in finance from various sources, including financial decisions type of financial resources, the period of financing, funding costs and yield results.

  • The decision of the Dividend (Dividend Decision), the financial manager must take decisions relating to the distribution of the net profit. The net profit is usually divided into two, namely Dividends to shareholders (Dividends for Shareholders) and profit on hold (Retained Profits).

The Function of Financial Management

The following are some of the functions of financial management:

  • Estimated capital requirements.

    A manager of finance must make estimates with respect to the company's capital requirements, capital requirements. This Estimation depends on the estimate costs and expect profits. As well as programs and company policies. Estimation should be done in a way that adequately. So that it can reach the company's revenue.

  • Determination of the composition of the Capital

    After capital structure estimation, should be decided. This involves the analysis of the short-term debt. The equity long term and depending on the proportion of capital. Own company and additional funds, that must be collect from the other party.

  • Choose the source of the funds

    To obtain additional funds, the company may select some sources. Such as publish shares and debt and borrowing from a bank or conduct other financial institutions. The funding source selection factor depends on the management of the company. To assess the advantages and disadvantages of each source of funding and also the period financing.

  • To invest

    Financial manager should decide to allocate funds to a profitable business so as to maintain the security of investments and allows to obtain the expected profit.

  • Determine the net income

    Finance manager must determine the decision of the company's net profit. The decision of this net income typically consists of two declared dividends and profit withheld for investment company henceforth.

  • Cash Management

    Financial Managers must make decisions relating to the management of the cash needed to pay for salaries and wages, pay electric and water bills, purchase of raw materials, keeping enough inventory, meet current liabilities, payments to creditors and others.

  • Controlling and supervising the corporate finance

    Financial manager not only plan and utilize the funds, but also have to control and oversee the company's finances. In General, this financial control using several ways that include ratio analysis techniques, financial forecasting, cost control and profit.

Financial management objectives

Financial management in General related to the procurement, allocation, utilization and control of financial resources. As for the objectives of financial management are:

  1. Ensure the supply of adequate and regular funding for the company.

  2. To ensure an adequate return to shareholders which will depend on the capacity of the revenue. The market price of shares and the shareholder's expectations.

  3. To ensure the optimal Fund make use of. The Fund gains must be utilize in both the most minimum cost.

  4. Ensure the security of the invested funds, investment should be consider. So well that returns in accordance with expectations. Examples of investment in safe and thriving business. So getting an adequate return on investment levels.

  5. Planning a good capital structure, capital structure should have a healthy composition. So that it maintain a balance between debt and capital itself.

No comments:

Post a Comment