Financial Management

Business finance: The money required for carrying out business activities is called business finance. Almost all business activities require some finance. 

Finance is needed to establish a business, to run it, to modernize it, to expand and diversify it.

Financial Management: Financial Management is concerned with optimal procurement as well as usage of finance. 

For optimal procurement, different available sources of finance are identified and compared in terms of their costs and associated risks. 

Objective and Financial Decision: The primary aim of Financial Management is to maximize shareholders' wealth which is referred to as the wealth maximization concept. 

The market price of a company's shares is linked to the three basic financial decisions.

Financial decision-making is concerned with the three broad decisions which are investment decision, financing Decision, and Dividend decision.

Financial Planning and importance: Financial Planning is the essential preparation of a financial blueprint of an organization's future operation. 

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The objective of financial planning is to ensure that enough funds are available right time.

Financial Planning is an important part of the overall planning of any business of the enterprise. 

It aims at enabling the company to tackle the uncertainty in respect of the availability and timing of the funds and helps in the smooth functioning of an organization.

Capital structure and factor: some of the important decisions under financial Management relate to the financing Patten or the proportion of the use of different sources in raising funds. 

Based on ownership, the sources of business finance can be broadly classified into two categories viz., Owners' funds and borrowed funds. Capital structure refers to the mix between owners and borrowed funds.

Fixed and working capital Fixed capital refers to investment in long-term assets. Management of fixed capital involves the allocation of a firm's capital to different projects or assets with long-term implications for the business. 

These decisions are called investment decisions or capital budgeting decisions. They affect the growth, profitability, and risk of the business in the long run.

 

Factors affecting the requirement of fixed capital are Nature of business, the scale of Operations, choice of Technique, technology up-gradation, Growth prospects, diversification, financing alternative, and level of collaboration.

Factor affecting the working capital requirement is Nature of business, the scale of Operations, Business cycle, Seasonal Factor, Production Cycle, credit Allowed, Credit Availed, Operating Efficiency, Availability of Raw Materials, Growth Prospects, level of Competition, and rate of inflation.