ROLE OF FINANCIAL MANAGEMENT
- Financial management is one of the functions of management
- Financial management is concerned with
o Profits and losses of operations
o Control over funds
o Ensuring appropriate cash flow is available
o Chas management
o Raising funds / controlling internal funds
o Investment of funds
o Cost control / pricing
o Forecasting / measuring financial performance against expectations
- Accounting is a subset of financial management. Financial transactions must be recorded, classified, stored and eventually reported to the managers.
- OBJECTIVES OF FINANCIAL MANAGEMENT
o Liquidity Refers to cash reserves being held, or to the ability to turn and investment into cash with little or no delay or loss of capital
o Solvency Refers to a business ability to pay its debts when due, and remain a going concern
o Profitability Refers to how profitable the business is from the perspectives of profit on sales, assets and shareholders equity
o Efficiency Examines how well working capital is managed, that is how quickly cash is collected from debtors, inventory sold and creditors paid.
o Growth Once a business is formed and operations commence, it enters a growth phase, where there should be an increase in the number of goods or services sold
- THE PLANNING CYCLE
o Strategic or corporate plans involve how the business can accomplish ...