Functions of Financial Management

Functions of Financial Management

Financial management is concerned with raising financial resources and their effective utilization towards achieving the organizational goals. Functions of Financial Management are:

1) Investment Decision – The most important decision. It begins with the firm determining the total amount of assets needed to be held by the firm. There are 2 types of investment decision:

a) Capital Investment Decision – Involves large sums of money. The impact is critical. examples acquire a new machine or to set up a new plant.

b) Working Capital Investment Decision – a more routine or schedule form of decision . Examples are determination of the amount of inventories, cash and account receivables to hold within a certain period.

2) Financing Decision – The second major decision. After deciding on what assets to buy or what securities to invest in, the financial manager would have to decide on how to finance these assets.

3) Assets Management Decision – The third and last decision. Once the assets have been acquired and appropriate financing provided, these assets must be managed efficiently.

Functions of Financial Management