Core Aspects of Financial Management
Delve into the world of financial management with an in-depth look at the finance function, its objectives, scope, and functions. Learn about the importance of financial planning, allocation of resources, and more in ensuring the success and stability of organizations.
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Dr. SNS RAJALAKSHMI COLLEGE OF ARTS & SCIENCE (Autonomous) Coimbatore -641049 Accredited by NAAC(Cycle III) with A+ Grade (Recognized by UGC, Approved by AICTE, New Delhi and Affiliated to Bharathiar University, Coimbatore) DEPARTMENT OF COMMERCE COURSE NAME : FINANCIAL MANAGEMENT Unit I Topic : Financial Management FINANCE FUNCTION
FINANCE FUNCTION The finance function encompasses a comprehensive range of activities and responsibilities dedicated to managing the financial resources of an organization. It serves as the backbone of any enterprise, ensuring that the organization effectively acquires, allocates, and utilizes financial resources to achieve its strategic goals and maintain long-term stability. Ms. V Keerthana Dr SNSRCAS
OBJECTIVES OF THE FINANCE FUNCTION 1. Ensure Availability of Funds: Identifying, sourcing, and securing adequate financial resources to meet operational and strategic needs. 2. Optimize Utilization of Resources: Efficiently allocating financial resources to achieve the highest return on investment. 3. Maintain Liquidity and Solvency: Ensuring sufficient cash flow to meet short-term obligations and maintaining the organization s financial stability. 4. Support Strategic Goals: Aligning financial planning and decision-making with the organization s broader objectives, such as growth, expansion, or diversification. Ms. V Keerthana Dr SNSRCAS
SCOPE OF THE FINANCE FUNCTION Investment Decision (Capital Budgeting): Evaluating and selecting projects or assets that yield the best returns. Tools: Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period. Financing Decision: Determining the appropriate mix of debt and equity to finance operations and investments. Ensures cost-effective and sustainable funding. Dividend Decision: Deciding the portion of profits to distribute to shareholders as dividends versus retaining them for reinvestment. Working Capital Management: Managing short-term assets and liabilities to ensure operational efficiency. Involves managing inventory, receivables, payables, and cash. Ms. V Keerthana Dr SNSRCAS
FUNCTION OF THE FINANCE FUNCTION 1. Estimation of Financial Requirements: Assessing the amount of funds needed for current and future operations. 2. Financial Planning: Developing a roadmap for acquiring and allocating funds to achieve objectives. 3. Raising Funds: Sourcing capital through equity, debt, or other financial instruments. 4. Allocation of Funds: Prioritizing and distributing resources to various departments, projects, or investments. 5. Cost Control: Monitoring and reducing unnecessary expenses to improve profitability. Ms. V Keerthana Dr SNSRCAS
IMPORTANCE OF THE FINANCE FUNCTION 1. Ensures Business Continuity: Provides the resources needed to maintain daily operations and long-term projects. 2. Supports Decision-Making: Offers data-driven insights for strategic and operational decisions. 3. Enhances Profitability: Guides cost reduction and investment optimization. 4. Fosters Growth: Enables expansion, diversification, and innovation through effective financial management. 5. Manages Risks: Protects the organization against market volatility and financial uncertainties. Ms. V Keerthana Dr SNSRCAS
