People without a background in commerce might assume that financial management is a tedious profession comprising unending balance sheets and constant discussion of money.
Financial management, however, entails more than that.
Management tasks and handling an organization’s financial resources are included in financial management. The most important component of any corporation is budgeting and organizing cash, and financial managers are the backbone of any organization.
The significance and use of financial management in India and around the world will be covered in this write-up.
The significance of financial management
Several factors make sound financial management essential:
- An organization’s economic growth and stability are guaranteed by sound financial management.
- Financial managers assist an organization in obtaining funding for operational expenses.
- Financial managers assist businesses in using funds more effectively.
- A financial manager’s primary duty is to recommend the best investment alternatives for the business.
- They reduce the risk involved in all investments.
- The proper judgments should be made by financial managers to maximize corporate profit.
- The company’s finance managers work to keep taxes as low as possible.
Financial Management’s Scope
Financial management is a crucial component of overall management and is mostly focused on the collection and utilization of finances within an organisation. We must examine the essential elements that greatly affect the range of financial management in order to comprehend this.
- Increasing profits
One of a financial manager’s most important duties is to maximize profits. There can be both short-term and long-term profits in a business. Financial managers have a responsibility to look into chances for profit-making while reducing risks.
- Maximization of wealth
The discrepancy between benefits and costs is what is referred to as a company’s wealth. A financial manager should therefore emphasize boosting the advantages in terms of cash flow. It can increase shareholder profit and add to the company’s financial strength.
- Planning and Financial Analysis
Financial managers must calculate how much money a company has on hand and allocate that money to the necessary managerial costs. The financial executives are in charge of determining the appropriate fixed and working capital requirements.
- Managing Cash Flow
To cover everyday expenses, settle debts, pay salaries, and fulfill a variety of other company commitments, cash is a must. Companies must therefore maintain significant financial reserves. To make sure that the money is available when needed, financial managers make sure that the company’s assets and securities continue to be largely liquid.
- Investing Choices
Making wise investment selections is the responsibility of financial managers. Investments made during the short term are money allocated to current assets. It can be utilized for inventory, bank deposits, and other short-term investments. In contrast, long-term investments are those financial instruments that may result in long-term capital gains.
- Management of Risk
Financial, business, and non-business risks are the three different categories of threats. Financial managers must take care to preserve assets from loss (financial risk) and be knowledgeable about potential future threats to the business.
Financial Management as a Career
Anyone interested in a career in financial management has many options. These job options are not only profitable but also present fascinating challenges. Corporate finance experts are hired by numerous businesses, governments, and PSUs. Banks, asset management firms, investment firms, brokerage houses, and insurance companies are other employers for finance managers.
Executives with strong financial management abilities are hired in a variety of non-financial businesses, including technology, retail, real estate, and others.
There is a significant need in the labor market for qualified financial managers with expertise in risk and fund management.
Since funds are a crucial component of every organisation, financial management becomes crucial. Therefore, if you’re a real aspirant to a career in finance, you can enhance your skill by enrolling in the best cfa coaching in India. These internationally recognized certificates increase your professional alternatives. Your resume will be enhanced by the CFA course.