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What is financial management and it's functions?

1.      What is finance?

Ans. Finance is the art and science of managing money. It includes financial instruments and financial services. The financial function is the procurement of funds and their effective utilization in business concerns, capital, funds, money, and amount.

2.      What is financial management?

Ans. It is concerned with the efficient use of an important economic resource namely, capital funds. Financial management is mainly concerned with effective funds management in business. In simple words, financial management as practiced by business firms can be called corporate finance or business finance.

3.      Important functions of financial management

Ans. Finance is the lifeblood of a business organization. It needs to meet the requirement of the business concerns. Every business concern must maintain adequate finance for the smooth running of the business concern and also maintain the business carefully to achieve the goal of the business concern. The business goal can be achieved only with the help of effective management of finance. We can not neglect the importance of finance at any time and in any situation. Some of the importance of financial management are as follows.

A)     financial planning

financial planning helps to determine the financial requirement of the business concern and leads to take financial planning of the concern. Financial is an important part of business concern, which helps to the promotion of an enterprise.

B)     Acquisition of funds

Financial management involves the acquisition of the required finance for the business concern. Acquiring needed funds plays a major part in financial management, which involves a possible source of finance at minimum cost.

C)     Proper use of funds.

Proper use and allocation of funds to improve the operational efficiency of the business concern. When the finance manager uses the funds properly, they can reduce the cost of capital and increase the value of the firm.

D)     Financial decision.

Financial management helps to take financial decisions in business concerns. The financial decisions will affect the entire business operation of the concern. Because there is a direct relationship with various department functions such as marketing, production, personnel, etc.

E)     Improve profitability

The profitability of the concern purely depends on the effectiveness and proper utilization of funds by the business concern. Financial management helps improve the concern's profitability position with the help of strong finance control devices such as budgetary control, ration analysis, and cost volume profit analysis.

F)      Increase the value of the firm.

Financial management is very important in the field of increasing the wealth of the investors and the business concerns. The ultimate aim of any business concern will achieve the minimum profit and higher profitability leads to maximizing the wealth of the investor as well as the nation.

G)     Promoting savings.

Saving is possible only when the business concern earns higher profit profitability and maximizes wealth effective financial management helps to promote and mobilize individual corporate savings.

               Nowadays financial management is also popularly known as business finance or corporate finance. The business concern or corporate sectors cannot function without the importance of financial management.

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