Fundamentals of Financial Management - MIT School of Distance Education

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MIT School of Distance Education

• Fundamentals of Financial Management

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• Financial Management is the backbone of every
  business whether small or vast. The success or
  failure of a business depends upon the management
  of finances. However, the term Financial
  Management is not limited to the procurement or
  allocation of money. It includes planning,
  organizing, controlling and directing the various
  activities related to finance.

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Elements of Financial Management

• Different elements play pivotal roles in the
  functioning of any management. Lets have a brief
  look at the basic elements of financial
  management which affects its core functioning.
• Investment Decisions Investment decision is the
  primary element of financial management. It
  involves decisions related to investment in
  current and fixed assets. It is also termed as
  working capital decisions and capital budgeting.

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• Dividend Decisions Proper distribution of
  profits among the shareholders and the management
  of the company is essential. The decisions
  regarding the profit division are taken by the
  finance manager. Usually, the dividend rate is
  decided for the shareholders and some profits are
  retained in the company for its growth.

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• Financial Decisions There are various
  circumstances under which a company would require
  raising of finance either from internal or
  external factors. Thus, the finance manager has
  to come up with the different decisions for
  raising finances depending upon the source, cost
  or the period of financing.

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Functions of Financial Management

• Choice of sources of funds There are various
  choices for a company when it comes to raising
  funds. It can either be through shares
  debentures and loan from public deposits or
  different financial institutions.
• The financial manager has to choose wisely while
  selecting the source of funds. He should give
  preference to internal sources.

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• Management of cash Cash management is very
  essential as it ensures constant working capital
  in the company. Various miscellaneous payments,
  remunerations, current liabilities, etc should
  usually be paid in cash by the finance manager.

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• Disposal of Surplus The profit earned by the
  company needs to be divided among the
  shareholders in the form of a dividend on their
  shares. Thus, the finance manager declares the
  dividend rate and after distributing the profits,
  the remaining part is retained by the company
  which is utilized for its expansion.

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Objectives of Financial Management

• Finance Management aims at the successful run of
  the business by managing the finances. There are
  certain objectives of financial management which
  are listed below
• Ensure regular supply of funds in the company.
• Ensure optimum utilization of funds so as to gain
  maximum benefit in minimum cost.

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• Ensure that the shareholders receive a regular
  return on their money invested. This is dependent
  upon the market price of the share and profit
  earnings of the company.
• Maintain a proper balance between the companys
  debt and equity.

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• So, these were the fundamentals of financial
  management. Every finance professional must be
  aware of these basics in order to plan and
  implement effective financial management in an
  organization. At MIT School of Distance Education
  (MIT-SDE), we train the future managers and
  impart necessary managerial skills. MITSDE offer
  PG Diploma in Financial Services Correspondence
  Courses.

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• We offer distance MBA equivalent PGDM and PGDBA
  courses that are a mix of theoretical and
  practical approach. We also conduct webinars to
  build concepts and skills of the students. Our
  candidates are immediately absorbed in the
  industry after course completion.  So, if you
  want to enhance your employability, then
  pursue correspondence MBA courses from MIT-SDE.

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