Financial management is the business function concerned with profitability, expenses, cash and credit, so that the "organization may have the means to carry out its objective as satisfactorily as possible;" the latter often defined as maximizing the value of the firm for stockholders. Financial managersFinancial Managers

Bureau of Labor Statistics The Bureau of Labor Statistics (BLS) is a unit of the United States Department of Labor. It is the principal fact-finding agency for the U.S. government in the broad field of labor economics and statistics and serves as a principal agency of t ...

(FM) are specialized professionals directly reporting to senior management, often the financial director (FD); the function is seen as 'Staff', and not 'Line'.

Role

Financial management is generally concerned with short term working capital management, focusing on current assets and current liabilities, and managing fluctuations in foreign currency and product cycles, often through hedging. The function also entails the efficient and effective day-to-day management of funds, and thus overlaps treasury management. It is also involved with long term

strategic financial management Strategic financial management is the study of finance with a long term view considering the strategic goals of the enterprise. Financial management is nowadays increasingly referred to as "Strategic Financial Management" so as to give it an in ...

, focused on i.a. capital structure management, including capital raising, capital budgeting (capital allocation between business units or products), and

dividend policy Dividend policy is concerned with financial policies regarding paying cash dividend in the present or paying an increased dividend at a later stage. Whether to issue dividends, and what amount, is determined mainly on the basis of the company's una ...

; these latter, in large corporates, being more the domain of " corporate finance." Specific tasks: * Profit maximization happens when marginal cost is equal to marginal revenue. This is the main objective of Financial Management. * Maintaining proper

cash flow A cash flow is a real or virtual movement of money: *a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account to another; the term 'cash flow' is mostly used to describe payments that are expected ...

is a short run objective of financial management. It is necessary for operations to pay the day-to-day expenses e.g. raw material, electricity bills, wages, rent etc. A good cash flow ensures the survival of company; see

cashflow forecast Cash flow forecasting is the process of obtaining an estimate or forecast of a company's future financial position; the cash flow forecast is typically based on anticipated payments and receivables. See Financial forecast for general discussion ...

. * Minimization on capital cost in financial management can help operations gain more profit. * Estimating the Requirement of Funds:Budget Analysts
Bureau of Labor Statistics Businesses make forecast on funds needed in both short run and long run, hence, they can improve the efficiency of

funding Funding is the act of providing resources to finance a need, program, or project. While this is usually in the form of money, it can also take the form of effort or time from an organization or company. Generally, this word is used when a firm us ...

. The estimation is based on the budget e.g.

sales budget Revenue management is the application of disciplined analytics that predict consumer behaviour at the micro-market levels and optimize product availability, leveraging price elasticity to maximize revenue growth and thereby, profit. The primar ...

, production budget; see

Budget analyst A budget is a calculation play, usually but not always financial, for a defined period, often one year or a month. A budget may include anticipated sales volumes and revenues, resource quantities including time, costs and expenses, environmenta ...

. * Determining the Capital Structure: Capital structure is how a firm finances its overall operations and growth by using different sources of funds. Once the requirement of funds has estimated, the financial manager should decide the mix of debt and equity and also types of debt.

Relationship with other areas of finance

Two areas of finance directly overlap financial management: (i) Managerial finance is the (academic) branch of finance concerned with the managerial significance of financial techniques; (ii) Corporate finance is mainly concerned with the longer term capital budgeting, and typically is more relevant to large corporations. Investment management, also related, is the professional asset management of various securities (shares, bonds and other securities/assets). In the context of financial management, the function sits with treasury; usually the management of the various short term financial legal instruments (contractual duties, obligations, or rights) appropriate to the company's cash- and liquidity management requirements. See . The term "financial management" refers to a company's financial strategy, while personal finance or

financial life management Wealth management (WM) or wealth management advisory (WMA) is an investment advisory service that provides financial management and wealth advisory services to a wide array of clients ranging from affluent to high-net-worth (HNW) and ultra-high ...

refers to an individual's management strategy. A financial planner, or personal financial planner, is a professional who prepares financial plans here.

Financial management systems

Financial management systems are the software and technology used by organizations to connect, store, and report on assets, income, and expenses.

Role

Relationship with other areas of finance

Financial management systems

See also

References

Further reading