Thursday 10 January 2019

The role of financial management

financial management

Financial management is management against financial functions. The functions include financial
How obtain funds (raising of fund) and how to use those funds (allocation of fund). Financial managers concerned with the determination of the amount of assets that are worthy of investment in a wide range of assets and choosing the sources of funds for finance assets
To obtain funds, financial manager can get it from within and outside the company. Sources from outside the company are derived from the capital market, could be the shape of debt or private equity. 


Financial management can be defined from the duties and responsibilities of financial managers. Principal financial management duties include decision of investing, financing business activities and the Division of dividends a company, thus the task of financial managers is planned to maximize the value of the company. Other important activities to do financial manager concerning four aspects, namely:

  • The financial manager must collaborate with other managers who are responsible for the general planning of the company.
  • Finance Manager should focus on investment and financing decisions, and things related to it
  • The financial manager should collaborate with the managers in the company so that the company can operate as efficiently as possible
  • The financial manager must be able to connect the company with financial markets, where companies can raise funds and securities companies can be traded.

Company goals and objectives

Another important aspect of company goals and objectives of financial management are a consideration against the social responsibility that can be seen from the four facets are:

  • If financial management led to the maximize share price, then needed a good and efficient management in accordance with the request of the consumer.
  • Companies that succeed always puts the efficiency and innovation as a priority, resulting in a new product, the discovery of new technologies and the expansion of employment
  • External factors such as environmental pollution, guarantee of product safety and safety becomes even more important to consider. Fluctuations in all levels of business activity and the changes that occur in the conditions of financial markets is an important aspect of the outside environment.
  • Cooperation between industry and Government is very necessary to create rules governing corporate behavior, and instead the company comply with the regulation. The purpose of the company is basically maximize the value of the company by technical considerations.
Basically the goal of financial management is to maximize the value of the company. But behind these goals there is still a conflict between the owners of the company by financier as creditors. If a company is running smoothly, then the value of the company's shares will be increased, while the value of corporate debt in the form of bonds were not affected at all.

So it can be concluded that the value of the stock ownership can constitute an appropriate index to gauge the level of effectiveness of the company. Based on the reasons that, then the financial management objectives stated in the form of corporate ownership of the stock value maximization of existing, or maximize the stock price.

The purpose of maximize share price does not mean that managers should strive to seek a rise in the value of the shares at the expense of the holder of the bonds.


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  2. Thanks for sharing this info i am doing my distance certificate course in finance form distance learning center in Pune and this info really helpful for me. Keep sharing.