Financial Management And Controllership

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Financial management determines the objective of business for profit maximization or wealth maximization. Finance management decides on short term and long term objective of business operation.

Financial Management is one of the important functions of management in dealing with the resource and monetary aspect of business for funding and operating a business with adequate return.

Functions of Financial Management

1.Estimation of capital requirements: A finance manager has to make estimation with regards to capital requirements of the company. This will depend upon expected costs and profits and future programmes and policies of a concern. Estimations have to be made in an adequate manner which increases earning capacity of enterprise.
2.Determination of capital composition: Once the estimation have been made, the capital structure have to be decided. This involves short- term and long- term debt equity analysis. This will depend upon the proportion of equity capital a company is possessing and additional funds which have to be raised from outside parties.
3.Choice of sources of funds: For additional funds to be procured, a company has many choices like- a.Issue of shares and debentures b.Loans to be taken from banks and financial institutions c.Public deposits to be drawn like in form of bonds. Choice of factor will depend on relative merits and demerits of each source and period of financing.
4.Investment of funds: The finance manager has to decide to allocate funds into profitable ventures so that there is safety on investment and regular returns is possible.
5.Disposal of surplus: The net profits decision have to be made by the finance manager. This can be done in two ways: a.Dividend declaration - It includes identifying the rate of dividends and other benefits like bonus. b.Retained profits - The volume has to be decided which will depend upon expansional, innovational, diversification plans of the company.
6.Management of cash: Finance manager has to make decisions with regards to cash management. Cash is required for many purposes like payment of wages and salaries, payment of electricity and water bills, payment to creditors, meeting current liabilities, maintainance of enough stock, purchase of raw materials, etc.
7.Financial controls: The finance manager has not only to plan, procure and utilize the funds but he also has to exercise control over finances. This can be done through many techniques like ratio analysis, financial forecasting, cost and profit control, etc.

- Simply, it is 'doing the right thing' in relation to working for your employer. The individual should operate in a manner that enhances or maintains company assets and maximizes quality and productivity. This would include maintaining accurate records of business transactions and following accepted accounting principles and laws. In addition, assets are enhanced through sound risk-based decisions. Examples of 'doing the right' thing would be protecting intellectual property by not disclosing proprietary information and insuring appropriate patent activity be instituted. Another example would be to insure internal transparency (for instance sales forecasts and accurate accounting). The employee would also take responsibility in managing personal expenses.


Louis F. Patten C.P.A. is a full service accounting firm.

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