Financial Management - Importance and Objectives

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Financial Management Importance and Objectives

Robert Smith
Finance Consultant
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Contents

• Introduction
• Importance of Financial Management
• Objectives of Financial Management
• Conclusion

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Introduction

• It is the art and science of managing money. It
  is the duties of financial managers in a business
  firm.
• Financial management is all about obtaining funds
  and how to use that fund.
• Financial Management is a careful selection of
  the source of working capital.
• It includes financial planning, financial
  administration and financial control.

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Importance of Financial Management

• Development and Economic Growth
• Improved Standard of Living
• Improved Health

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Contd..

• Creates Job
• Alleviation of Poverty
• Better Financial Decisions

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Objectives of Financial Management

• Two main objectives of financial management are
• 1. Profit Maximization
• 2. Wealth Maximization
• It provides a framework for optimum financial
  decision making.
• It operates internal investment and financing of
  the firm.

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Contd..

• Profit Maximization

• Profit/EPS maximization should be taken and
  those that decrease profit/EPS should be avoided.
  
• It deals with the allocation of resources. Here
  resources are working capital for business
  funding.
• Financial Management (FM) mainly depends on
  efficient economic resource i.e. capital.
• The technical flaws of Profit Maximization are
• 1. Ambiguity
• 2 . Timing Benefits
• 3. Quality Benefits

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Contd..

• Wealth Maximization

• Wealth maximization is also known as value or net
  present worth maximization. It should satisfy all
  three requirement, i.e. exactness, quality and
  money value of time.
• The technical flaws of Wealth Maximization are
• 1. Focus on Stakeholders
  Stakeholders include
• groups of employees, investors and stakeholders
  which are
• directly related to the firm.
• 2. EVA (Economic Value Added)
  EVA is equal to
• after tax operating benefits of a firm less the
  cost of the firm

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Conclusion

• Financial Management is the mixture of financial
  planning, administration and control.
• Financial corporation deals with how corporation
  obtains the funds and how corporation allocates
  that funds.

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References

• http//en.wikipedia.org/wiki/Financial_management
  
• https//48factoring.com/working-capital-financing
• http//www.managementstudyguide.com/financial-mana
  gement.htm
• http//www.slideshare.net/anurag_toby/objectives-o
  f-financial-management-26656656

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• Thank You !!!