Principles of Financial Management - MIT School of Distance Education

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MIT School of Distance Education

• Principles of Financial Management

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• Financial Management is concerned with
  maintaining finances in a business so that it
  never runs out of cash. It is concerned with the
  financial requirements of a business as well as
  financial planning. Perfect financial management
  facilitates business to make ample profits,
  expand itself and succeed in the long-run. In
  general, there are certain principles of
  financial management

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• 1. Expenditure should be less than the revenues
  generated
• Most of the businesses lose balance over
  finances and are unable to overcome or avoid debt
  because they spend more than the revenues
  generated. However, for a business to sustain its
  position in the long run and to look for further
  growth, it must frequently track its financial
  statement as well as expenses to avoid excessive
  outflow.

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• 2. Plan for the unexpected
• A business should always be well-equipped to
  meet the financial emergencies at any point in
  time. To overcome such point of crisis
  effortlessly, the business must save money and
  put restrictions on its cash outflow. This will
  protect the business in derailing from its long
  term goals or objectives. Thus, financial
  management must be robust to face any kind of
  consequences and achieve the desired goals in a
  limited time period.

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• 3. Diversification is not just for investments
• For any business, investments are believed to be
  the best method to ensure a regular inflow of
  cash. However, businesses should not just rely on
  investment, but they should regularly find
  different ways to generate more revenues.

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• Apart from businesses, even employees working in
  a company can finds ways to earn extra income.
  For this, they can look for a part-time business
  or start a small business at their dwellings.
  Thus, this brings a change in overall financial
  profile.

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• 4. Organising
• The very basic step for efficient financial
  management is to organise funds and finances. A
  business must track its different financial
  activities and sources which include brokerage,
  mortgage, loans or credit limit to avoid any
  chaos in the future.

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• 5. Understanding risk
• It is a golden rule that more the risk a
  business takes, more would be its return on
  investment (ROI). However, this is possible only
  if the business has massive information and
  knowledge about finances and investments.
  Usually, investment in shares and bonds are
  considered to be the best source for earning huge
  profits. But, at the same time they involve a
  higher risk too. So, financial managers should
  have an understanding of risks before taking
  them. 

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• 6. Limited debt
• To ensure a regular inflow of cash, a business
  must avoid taking unnecessary loans and clear all
  its previous debts. Furthermore, a business must
  opt for loans to procure necessary items only.

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• So these were the principles of financial
  management. Finance is the cornerstone of every
  business so companies look for finance managers
  who can maximise profits and minimise losses. If
  you wish to become a finance manager, then you
  can pursue Post Graduate Diploma in
  Management (PGDM) or Post Graduate Diploma in
  Business Administration (PGDBA) with Finance
  Management as specialisation from MIT School of
  Distance Education (MIT-SDE).

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• The course trains the candidates to effectively
  manage the finances of the organisation and
  enhance their employability skills. So, apply for
  this job-centric course right away!  

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• THANK YOU