Planning of one’s finances to reach financial goals is called financial management. Financial planning is the correct planning of your capital which is a comprehensive evaluation of your income and your future personal financial status. Financial planning helps in obtaining and protecting your financial resources. It lets you plan your budget for every month to every year.
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There is an increase in awareness of personal financial planning nowadays. While protecting yourself and your company from any financial emergencies, financial management is important to learn. With the increasing economic expenses, it is almost impossible to track/monitor your company’s funding expenses. Thus, financial management introduces a process to organize and manage your company’s funds/finances. Let have a look at the introduction to financial management.
Introduction To Financial Management
The application of general principles of finance to plan, organize, direct and control the financial activities such as procurement and utilization of funds of any company or business is known as the concept of financial management. One of the important principles of financial management is looking at the cash flow of any company and turning it into resource revenue.
A skill set is required for financial planning, learning, and management at a managerial level. While following all the principles of financial management a business or a company maintains effective financial goals and business operations. It is nothing but a perfect balance between risks and profits. Learning of the introduction to financial management helps a company to achieve most of its financial goals and objectives.
When the business flourishes, there is more cash flow, which means there will be a necessity for the financial management team. This team handles all kinds of concepts of financial management to provide maximum profits with minimum funding/investments.
This was a quick introduction to financial management. Let’s read in detail the different types of financial management
Types Of Financial Management
There are different types of Financial Management according to their features. The table below contain 5 types of financial management.
| S.no | Names of different types of financial management concepts | Features of different types of financial management concepts |
| 1 | Treasury and Capital Bud Management | The amount of cash flow a business or company has is put for budgeting to invest in new ventures. |
| 2 | Capital Structure Management | Determines the combination of various sources of funding in a company/business. |
| 3 | Working Capital Management | A business strategy that ensures that a company/business operates efficiently. It monitors and uses its current assets to their maximum effect. |
| 4 | Financial Planning, Analysis and Control Management | FP&A is a set of four activities- Planning and budgetingIntegrated financial planning ManagementPerformance reportingForecasting and modeling for a company/business. |
| 5 | Insurance and Risk Management | An assessment of financial impacts to settle and an ability to spread across the risks. |
Principles Of Finance Management
To get rich is like a dream for most of us. All you have to do is execute principles of financial management process that have to be followed rigorously. That is possible only by keeping some objectives clear for the financial management process. There are 6 principles of financial management. Let’s discuss the principles of finance in detail:
Organize the Finances
After analyzing your company’s finances, financial management plans out short-term or long-term expenses. For example, what is important and what is not important for the company/business. Organizing finances is the key to achieving financial freedom.
Budgeting of Finances
This is one of the principles of finance that determines the debt-to-equity ratio for short-term and long-term financial decisions. This management decides on a budget for all kinds of expenses in fundraising in different projects in a company/business.
Financial policies to income-producing benefits
This principle will determine your company’s decisions for funds distribution in different projects’. Financial management makes very clear-cut financial management concepts for the company to follow.
Monitor and Re-Budget
If the finance module prepared is good enough, financial management can monitor and re-budget your company’s/business assets to get more returns even after paying taxes.
Risk Return Trade-off
The main principles of finance management is to make sure that in less money your company/business achieves maximum benefits. It indicates that the higher the risk, the higher the potential reward.
Follow all these principles of financial management to achieve the financial goals of your company and let your business fly high into the sky.
Concept of financial management
Introduction to financial management can be understood by understanding the cash flow of a company or a business. Forecasting the finances in a company or a business would determine the time value of money. Financial management concepts are determined by the time value of money and the formation of optimal capital structure.
Financial management would help in aligning the financial decisions to the business life cycle. Maximization of all the profits in a company is the basic objective of any business. The concept of financial management is to make sure the company receives maximum profits.
A management activity that is concerned with the financial decisions of a company or a business on how to procure funds and give an account of funds is the basic concept of financial management.
Financial Management Process
The functions of financial management are also called as Financial Management Process. Determining the capital structure, evaluating and setting the source of funds, allocating and controlling funds, distribution of profits and surplus, monitoring the financial activities, estimating the required funds, and re-budgeting after the market research all come under Financial Management Process.
Conclusion
Financial management is just like farming. You sow today and you reap the fruits or the benefits of financial management tomorrow. The introduction to financial management is our utmost requirement today for the economic growth of the country. Understanding why we have to start financial management is the first step towards receiving a company’s /business’s financial benefits in the future. Regardless of what the cash flow/income; it is important to create a healthy habit of planning the finances of a company. Financial management concepts will let you create fancy funds for rainy days too. Therefore, financial management is important. It is the best way to achieve small or big, short-term or big-term finances.
FAQs on Financial Management
Q1. What do you mean by financial management?
A1. A skill set is required for financial planning, learning, and management at a managerial level is called financial management.
Q2. Name key functions in the introduction to financial management.
A2. Investment of funds, Liquidity maintenance, Measuring the cost of capital, and financial planning and forecasting are the key functions in the introduction to financial management.
Q3. Name any five different types of financial management.
A3. Treasury and Capital Budget Management, Capital Structure Management, Working Capital Management, Financial Planning, Analysis, and Control Management, Insurance and Risk Management. are the five different types of financial management.
Q4. What do you mean by financial management concepts?
A4. A management activity of a company to procure funds to give maximum profits is called financial management concepts.
Q5. What are the benefits of introduction to financial management?
A5. The biggest benefit of introduction to financial management is to keep a company following the path of financial security and freedom.
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Hello there, my name is Phulutu, and I am the Head Content Developer at Nivesh Karlo. I have 13 years of experience working in fintech companies. I have worked as a freelance writer at Policybazaar, Paytm Money, Investopedia, and others. I love writing about personal finance, investments, mutual funds, and stocks. All the articles I write are based on thorough research and analysis. However, it is highly recommended to note that neither Nivesh Karlo nor I recommend any investment without proper research and read all the documents carefully.
