Last updated on March 11th, 2023 at 11:35 am
Introduction
Financial management is about managing a firm's financial resources. It includes the decisions made about how to allot and invest funds. The field is highly relevant. So, the top firms are keen to hire experts in finance management. Financial management helps employees make informed decisions. A financial management course can also pave the way for a career in capital markets. Let us look at the uses of a financial management course and how to get started.
Objectives of financial management
Here are the aims of financial management:
It helps boost profits and improve shareholder value.
It is used to get a high Return on Investment (ROI).
It can help manage financial risks.
It helps maintain liquidity and financial stability.
It can help in cost analysis to put in place cost-cutting measures.
It is used to allot resources effectively to improve overall performance.
It ensures regulatory compliance as per the rules and standards.
Who needs financial management?
A finance management course can help everyone, from individuals to firms. Here are the uses of financial management:
Entrepreneurs and small business owners
Entrepreneurs and small business owners want to grow their businesses. They can make informed financial decisions in these ways:
Managing cash flow
Controlling expenses
Forecasting revenue
Non-profit organizations
Non-profit organisations rely on funding and grants. They can use their resources efficiently by tracking expenses and managing budgets.
Government agencies
Financial management is vital for government agencies to manage public funds. Financial regulations and performance reporting can ensure that the agency uses tax money properly.
Investors
Financial management is useful for investors to make informed investment decisions. A finance management course helps in these ways:
Analysing financial statements
Evaluating financial ratios
Assessing risks for investment returns
Individual professionals
Some businesses are run by individual professionals like doctors, lawyers and consultants. They control their expenses and make retirement plans to ensure financial stability.
Scope of financial management
Financial management has a large scope. Here are some key areas of financial management:
Financial planning
Financial planning involves setting financial goals and making strategies to achieve them. The key steps are budgets, revenue forecasting and evaluating investment opportunities. For instance, a company can forecast revenue based on sales projections.
Capital budgeting
Firms use capital budgeting to analyse investment opportunities and decide the projects to invest in. They evaluate the ROI, risks and the cost of the capital.
For example, suppose a firm wants to evaluate potential investment opportunities in research and development. The firm can use capital budgeting to pick the right projects. The choice depends on the expected ROI.
Cash flow management
A firm has to manage the inflow and outflow of cash. Cash flow management ensures that the firm has enough liquidity to meet its financial obligations. Apart from that, the firm manages the accounts receivable and payable and the working capital.
Risk management
Financial risks can impact the firm's performance. Risk management is the identification and mitigation of such risks.
Suppose a firm wants to determine credit risk. It must evaluate the creditworthiness of its customers. Apart from that, the firm can also manage operational risk. For this, the firm has to implement controls against fraud and errors.
Financial reporting
Financial reporting is the preparation of financial statements. They are used to draw insights into the firm's financial performance. The statements include balance sheets and income and cash flow statements. Investors, lenders, and regulatory agencies get updates about the company's economic progress from these reports.
Functions of financial management
Financial management is highly useful. Here are the key functions:
Procurement of funds
A key function of financial management is getting funds. Firms find sources of funding and raise capital to finance their operations. Here are the ways to procure funds:
The firm issues stocks.
The firm borrows funds from banks or financial institutions.
The firm can use internal funds.
Suppose a startup wants funds to raise capital. The startup can seek seed funding from capitalists and finance its operations.
Allocation of funds
Another function is to decide how to allocate the funds within the firm. For example, a brand may want to focus on creating new products and services. So, it can allot more funds to research and development.
Financial control
Every firm has its financial goal. It monitors its financial performance to meet these goals. This is financial control. For instance, a company executes cost control measures to enlist expenses with budgetary limits. Financial control also includes monitoring budget performance, cash flows and financial ratios.
Profit management
One more function of financial management is to manage profits. It helps a firm ensure financial stability and sustainability. Profit management includes:
Managing profit margins
Maximising revenue
Reducing expenses
Reporting and analysis
A firm prepares financial reports for financial management. It can then interpret the data to gain insights. Firms also make balance sheets, and income and cash flow statements.
Get started with the Finance Management Course
Both graduates and working professionals can benefit from the finance management course. This Certified IIM Calcutta Executive Program in Investment Banking covers all you need. Join this course through Imarticus Learning, a learning platform for professionals. Enrol today.
