We know that the goals of financial management help to achieve maximization. The maximization of profit and wealth.
Because these are the goals that make the manager take financial decisions.
Such decisions that ensure the achievement of high-level profits.
What will I learn?
So let’s see first what is financial management?
What is Financial Management?
Financial management is a process. It involves planning, organizing, directing, and controlling the financial activities.
5 Goals Of Financial Management – A Comprehensive Summary:
These activities are the procurement and use of funds for the enterprise.
So it means applying general management principles to the financial affairs of the enterprise.
The management principles are sales, purchases, and capital expansion.
And inventory valuation, financial reporting, and profit distribution are also under this category.
These are the primary goals of financial management.
1. Dissemination of Information:
It involves circulating monthly, quarterly, and annual financial information of stakeholders.
The information should disseminate on time. Because the goal is to prepare financial information according to accounting principles.
Owners and employees get the most reliable information. Financial reports help the government. So that the government can examine the tax obligations of the business.
And suppliers get information about the stability of business from financial reports.
2. Forecasting With The Help Of Financial Management:
The financial plans help the business in making its activities more efficient. Because the goal is to make a match.
A match between operational activities and cash-flow capabilities. The goal focuses on sourcing enough funds within a time.
And then allocating these funds to different activities of the business.
Financial plans assist a business to invest in long-term profitable activities.
3. Risk Management
Managing risks is the most important goal of financial management.
Financial decisions should be minimizing risks as well as increase profits. Because return and risks determine the value of a firm.
Both of these are in direct relation with each other. So it’s necessary to create a judicious balance between risk and return. So that the value of the firm maximizes.
There must be enough flexibility in the financial operations of the firm. So that they can deal with uncertainty and risks.
Strategic alternatives can create flexibility. Because these strategic alternatives are about investment outlets and the acquisition of funds.
4. Exercising Controls In Financial Management:
The goal is to control the internal financial resources. To use the resources in an effective manner.
These controls help in the inspection of financial transactions.
So that business owners or employees do not misuse financial resources. And the transparency is not harmed.
Senior management staff and internal auditors control the inspection. And the failure to put controls in action can cause damaging consequences.
See Also: 5 Most Important Role And Types Of A Stakeholder
5. Making Dividend Decisions Helps In Financial Management:
The dividend is the return to shareholders. Though it’s not an obligation of the firm to pay this dividend.
Financial management decides how much dividends to pay to shareholders. And how much to keep in the firm.
It also answers questions like when and in what form to pay the dividend.
The goals of financial management aren’t limited to managers only. If there is proper finance management in the firm.
Then it can provide better quality products to its customers at lower prices.
Also, employees can get higher salaries. And still, investors can get higher returns.
Drop a comment to tell us your experience of financial management.
Last Updated on 2 years by Shahzaib Arshad
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