In literary meaning, financial management is management of Castillo or finance functions as per areas of management such as industrial relations management centering round labour activities or production management pertaining to activities for production and so on. In construction industry, many projects meet time 'and cost overruns resulting from inadequate fund flow and ineffective financial management.
Management of finance functions would for all practical purposes point to the procurement of funds and their effective utilisation. It is in the process of these activities that cashflow management will cover planning and decisions making on an organisation's needs of finance, raising it and utilising it in the most profitable manner.
The objective of a.11 organisation/business concern is to mainline its value to its shareholders, In pursuing the objective, cashflow management involves evaluation of resource allocation choices and concern itself with the rate of growth, asset nix, product mix, project evaluation, financial analysis, financing mix etc. Matters relating to fixed versus variable costs, and make or buy decisions also come to the fore.
The cost of capital acts as the nucleus of financial management. Risk, return and control are crucial factors in my system of financial management. The field of finance is enriched by the behavioral sciences and derives its analytically foundations from the economic theories.
The developments of cashflow management over the recent years have placed the Chief Finance Executive, more precluded them any other officer individually to provide the Chief Executive of the organisation with the planning and control tools he needs. As business activities involve use of funds, financial management is integrated in all spheres of activities in the organisation, financial management is, thus, an integral part of overall management rather them a water-tight compartment concocted merely with unclean raising operations. Financial management is directly concerned with production, constriction, marketing acquisition of assets so as to maximize profit and wealth generational through various operating goals.
Objectives
After studying this unit, you should be able to
- familiarize yourself with time value of money concepts,
- maintain Profit & Loss Accounts and Balance Sheet,
- describe various ratios used for economic comparisons,
- discuss the methods of inflation accounting,
- describe the methods of charging depreciation,
- explain personnel and equipment costs, and
- compute the overheads of different departments.
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