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An overview of financial management

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documents in English
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  1. Introduction
    1. Introduction to finance
    2. Introduction to financial management
  2. Importance of financial management
  3. Functional areas of financial management
  4. Financial management decisions
  5. The A's of financial management
  6. Introduction to cost accounting
  7. Advantages of cost accounting
  8. Bibliography

Finance is known to be the life-blood of business. It is extremely important to carefully look after the financial transactions and activities that go on in a business. Proper analysis and insight is necessary in order to plan for the future. The word finance comes from the Latin word ?finis'. Finance is defined as the provision of money at the time when it is required. Every enterprise, whether big, medium or small, needs finance to carry on its operations and to achieve their targets. Without adequate finance, no enterprise can possibly accomplish its objectives. Finance is defined as the issuance, distribution and purchase of liabilities, and equity claims issued for the purpose of generating revenue producing assets. These claims are commonly referred to as financial claims. Finance refers to the management of the flow of money through an organization. It is concerned with the application of skills in the manipulation, use and control of money.

Finance can be classified into public finance and private finance. Public finance deals with the requirements, receipts and disbursements of funds in the government institutions like states, local self governments and central government.

[...] A decision has to be taken whether all the profits are to be distributed, to retain all the profits in the business or to keep a part of profits in the business and distribute others among shareholders THE A's OF FINANCIAL MANAGEMENT Anticipating financial needs The financial manager has to forecast the expected events in business and note their financial implications. He is supposed to meet the financial needs of the enterprise. For this purpose, he should determine financial needs of the concern. [...]


[...] Optimal capital structure The financial manager must establish an optimal capital structure and ensure the maximum rate of return on investment. The ratio between equity and other liabilities carrying fixed charges has to be defined. In the process, he has to consider the operating and financial leverages of the firm. Cost volume profit analysis Fixed cost, variable cost and semi-variable cost have to be analyzed. It must be ensured that the income of the firm will cover its variable cost. [...]

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