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What is Financial Management and responsibilities of finance manager's?

 Finance management is a process of managing money with the help of planning, organising, directing and controlling the function of a organisation to meet the financial objective. It includes allocation of resources of finance, managing the cash in an organisation, managing the revenue generated from business activities, managing the expenses and reporting or recording the financial transaction in a book of accounts.

Finance has three main functions:

  • Investment decision
  • Dividend decision
  • Financing decision

Investment decision: Finance manager uses capital budgeting techniques to make investment decision. With the help of capital budgeting manager can invest money in those assets which gives higher return in future. As we all known future is uncertain and to measure it , is a difficult task. So, risk and return of investment proposals both are evaluated to choose the best proposal to get higher return in available risk.

Financing decision: It is related to the equity and borrowed fund which mixes to form a capital structure of a company to the run the business activities smoothly. Finance manager decides how much equity capital is needed or how much borrowed fund needed? so, that the shareholders wealth is not decreases with increase in borrowed fund or not to increase too much the number of shareholders which also lead to reduces the return of each shareholders and looses the management controlling power.

Dividend decision: It is related to the dividend given to the shareholders or keep it all profit aside for future uncertainty or a definite percentage of profit is given as dividend to shareholders and rest is keep it aside in company for expansion and growth purpose or to meet future uncertainties.

Liquidity decision: It is also include in finance decision but the main are above three decisions. It is related to the liquidity of a company to meet its day to day expenses. So, that production activity does not stop and the product is available in the market at time and company achieve its objective in future. Liquidity relate to the current assets management. In simple words liquidity means cash is available on time when needed in a company. Currents assets are those assets which are convertible into cash in short period you can say within a year.

Finance Manager's responsibilities:

Forecasting and planning: Manager's has to forecast the future activities and make a plan with the help of previous data to achieve the business goal that is maximise the profit and shareholders wealth.

Coordinating and controlling: It is manager's job to coordinating with other managers to know their department cash required. So, that he can make a business plan according to it. It is also manager's job to control the wastage of money and see the work is going on according to the plan formulated for each department to meet their cash requirement.

Investment and observing capital market: Finance manager's job is to invest the cash in those securities after evaluating the risk and return of different alternatives which provide high return in future.  For taking that investment decisions finance manager  has must observe the capital market to know which security is performing well in a market and for how long it doesn't perform negatively?, Which company stock perform good by comparing the risk associated with the return it provided in a particular time. Also find out in which securities money is invested for long period and in which invested for short period?Answers of all of these questions are come from by observing the capital market performance.

 


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