Financial Management

Definition
Financial management is concerns with the managerial decision that, results in the
acquisition and financing of long term and short term assets for the firm as defined by
Philippatos.
Finance means the procurement of fund. The finance management concerned on
planning, controlling and effective utilization of the firms resources
Objectives:
1. profit maximization
2. wealth maximization
Profit maximization
The objective of the company is to earn profit; hence the objective of financial
management is to also profit maximization, higher the risk, more is the possibility of
profit.
Objective:
Profit performance of a business can be improved by:
1. increasing volume
2. increasing selling price
3. decreasing variable cost
4. decreasing fixed cost
Wealth maximization
The objective of a firm is to maximize wealth and values of its share efforts are to be
taken to increase net-worth
Finance function:
1. managerial functions
2. routine function
Managerial function
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investment decision or capital budgeting

financing decision
dividend decision
liquidity decision

Fund flow analysis

.
Definition
Fund flow statement is the statement of source and uses of fund for a period of time; the
funds flow statement is a report of financial operation of the company covering all
movement of funds which involve an actual exchange of assets. The fund flow statement
analyses the causes of change in the firms (solid, fixed) working capital.