Question

Explain the meaning and the objective of Financial Management?

Answer 1

Financial management may be defined as planning, organising, directing and controlling the financial activities of an organisation. According to Guthman and Dougal, financial management means, “the activity concerned with the planning, raising, controlling and administering of funds used in the business.” It is concerned with the procurement and utilisation of funds in the proper manner.

Objectives of Financial Management

The financial management is generally concerned with procurement, allocation and control of financial resources of a concern. The objectives can be-

• To ensure regular and adequate supply of funds to the concern.
  
• To ensure adequate returns to the shareholders which will depend upon the earning capacity, market price of the share, expectations of the shareholders.
  
• To ensure optimum funds utilization. Once the funds are procured, they should be utilized in maximum possible way at least cost.
  
• To ensure safety on investment, i.e, funds should be invested in safe ventures so that adequate rate of return can be achieved.
  
• To plan a sound capital structure-There should be sound and fair composition of capital so that a balance is maintained between debt and equity capital.