Dear Readers,
As per Notification of Officer (Credit) JMGS- I and Manager MMGS- II released by Bank of India (BOI) and Reserve Bank of India Grade- B. There will be three subjects and one of the subjects is Financial Management. Financial Management is not one of the easier subjects so it requires your great effort. So, friends do not worry about that, Bankersadda is always with you for your best preparation for competitive examinations. Here are some topics/content of Financial Management. It is also helpful for Assistant Manager (Financial Analyst) in Oriental Bank of Commerce (OBC) Specialist Officers (SO) and RBI’s Grade-B.
Financial Management
Financial management is an integral part of overall management. It is concerned with the duties of the financial managers in the business firm. Financial Management is mainly concerned with the effective funds’ management in the business. In simple words, Financial Management as practiced by business firms can be called as Corporation Finance or Business Finance.
Scope of Financial management
Financial management is one of the important parts of overall management, which is directly related to various functional departments like personnel, marketing, and production. Financial management covers the wide area with multidimensional approaches. The following are the important scope of financial management.
1. Financial Management and Economics: – Economic concepts like micro and macroeconomics are directly applied with the financial management approaches. Investment decisions, micro, and macro environmental factors are closely associated with the functions of the financial manager.
2. Financial Management and Accounting: – Accounting records includes the financial information of the business concern. Hence, we can easily understand the relationship between the financial management and accounting.
3. Financial Management and Mathematics: – Modern approaches of the financial management applied a large number of mathematical and statistical tools and techniques. They are also called as econometrics.
4. Financial Management and Production Management: – Production management is the operational part of the business concern, which helps to multiple, the money into profit. Profit of the concerned depends upon the production performance.
5. Financial Management and Marketing: – Produced goods are sold in the market with innovative and modern approaches. For this, the marketing department needs finance to meet their requirements.
6. Financial Management and Human Resource: – Financial management is also related to human resource department, which provides manpower to all the functional areas of the management. The financial manager should carefully evaluate the requirement of manpower to each department and allocate the finance to the human resource department as wages, salary, remuneration, commission, bonus, pension and other monetary benefits to the human resource department.
Objectives of Financial Management
Effective procurement and efficient use of finance lead to proper utilization of the finance by the business concern. It is the essential part of the financial manager. Hence, the financial manager must determine the basic objectives of the financial management. Objectives of Financial Management may be broadly divided into two parts such as:
1. Profit maximization.
2. Wealth maximization.
1. Profit Maximization
The main aim of any kind of economic activity is earning the profit. A business concern is also functioning mainly for the purpose of earning the profit. Profit is the measuring techniques to understand the business efficiency of the concern. Profit maximization is also the traditional and narrow approach, which aims at, maximizing the profit of the concern.
2. Wealth Maximization
Wealth maximization is one of the modern approaches, which involves latest innovations and improvements in the field of the business concern. The term wealth means shareholder wealth or the wealth of the persons those who are involved in the business concern.
Approaches of Financial Management
Financial management approach measures the scope of the financial management in various fields, which include the essential part of the finance. Financial management is not a revolutionary concept but an evolutionary. The definition and scope of financial management have been changed from one period to another period and applied various innovations. In theoretical point of view, financial management approach may be broadly divided into two major parts.
1. Traditional Approach
2. Modern Approach
Importance of Financial Management
Finance is the lifeblood of the business organization. It needs to meet the requirement of the business concern. Each and every business concern must maintain the adequate amount of finance for their smooth running of the business concern and also maintain the business carefully to achieve the goal of the business concern. The business goal can be achieved only with the help of effective management of finance. We can’t neglect the importance of finance at any time and at any situation. Some of the importance of the financial management are as follows:
(a) Promoting Savings
(b) Increase the Value of the Firm
(c) Improve Profitability
(d) Financial Decision
(e) Proper Use of Funds
(f) Acquisition of Funds
(g) Financial Planning
All the best for Exams!!!!
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