FINANCIAL MANAGEMENT
The term financial management means proper management of financial resources and obtaining the funds from the one who have saved it and passing it to the one who take the fund into proper use. in short we can say that it is an activity of managing proper functioning controlling and administering the funds used in business activities.
Objectives of Financial Management
The mainn objective of financial management is maximizing the wealth of stakeholders through the maximization of value of the firm. The other prime objectives of financial management are maximization of wealth through maximizing the profit.
Financial management trades off between the risk and the return keeping eye on the fact that making efficient use of resources mainly capital financial management is generally a proper planning. Basically Financial Management acquires funds for meeting the long-term and short-term funds required for the business.
Functional Areas of Financial Management
•determination of financial needs
•determination of sources of funds
•analysis of finance
•optimal capital structure
•taxation of the corporation
•management of the working capital
•capital budgeting
•policy of the dividend
Short term and Long term sources of Finance
| Short-term Funds | Long-term Funds |
|---|---|
| 1)credit from trade and expense creditors | bonds and debentures |
| 2)advances from customers | term loans from institution like foreign currency loan |
| 3)Public deposits | Venture capital financing |
| 4)commercial papers | Loan from commercial banks |
| 5)Certificate of deposit | lease financing |
Types of Financial Markets
1) Money Market
2) Capital Market
| a)Primary Capital Market | b)secondary capital market |
|---|
• Money Markets: money markets are markets where funds are deal in monetary assets for short term funds . Money markets like other markets does not has a physical location but everything is dealt electronically. It has the characteristics of liquidity and it also provide access to financial institutions and other institution and users of short term funds to fulfill they requirements of borrowing and investments.
• Capital Markets:capital markets are generally divided into two parts primary and secondary markets. Primary market can be classified as a market where mobilization of finance takes place which is from investors to corporate structures by issue of new securities.
Secondary markets are markets where the securities i which have already been issued are traded and this is the reason why secondary market is also called after market. The main objective of this market is to help both buyers and sellers facilitate the security transfers and to bring liquidity.