Understand the Basic Concepts of Financial Management

A finance manager in a company must know how to manage all the elements and in financial terms, this must be done because finance is one of the important functions in achieving the company's goals.
Elements of financial management should be known by a manager. Let's say that a financial manager did not know what-what are the elements of financial management, it would appear difficult to run a company.
Therefore, a financial manager should be able to know all the activities of financial management, especially analyzing the sources of funding and its use to realize the maximum benefit for the company. A financial manager must understand the flow of money in circulation, both external and internal

Financial management is an activity planning, budgeting, audit, management, control, search and storage of funds held by an organization or company.


Objectives of Financial Management
Financial management is an activity planning, budgeting, audit, management, control, search and storage of funds held by an organization or company.

Financial Management Function
Here is a brief explanation of the function of Financial Management:

1.      Financial planning, income and expenditure to make plans as well as other activities for a certain period.

2.      Financial budgeting, follow-up of financial planning by making details of expenditures and revenues.

3.      Financial Management, used company funds to maximize the available funds in various ways.

4.      Finance search, find and exploit the resources available for the operational activities of the company.

5.      Financial storage, raising the company as well as storing and securing these funds.

6.      Financial control, evaluation and improvement of finances and financial systems in the enterprise.

7.      Audit, internal audit for the financial companies that exist to avoid deviations.

8.      Financial reporting, providing information about the financial condition of the company as well as an evaluation

When associated with this objective, the financial manager functions include the following:

1.      Supervision over costs

2.      Setting a pricing policy

3.      Foreseeing the forthcoming earnings

4.      Measuring or explore the cost of working capital

Analysis of Funding Sources and Uses
Analysis of the source of funds or fund analysis is very important for the financial manager. This analysis is helpful to know how funds are used and the origin of the acquisition of those funds. A report that describes the origin of the source of funds and use of funds. The analysis tool that can be used to determine the condition and achievements of the company's financial analysis ratios and proportional.

The first step in the analysis of sources and uses of funds is a report of the changes prepared on the basis of two balance sheets for two times. The report describes the change of each of these elements that reflect their source or use of funds.

In general, financial ratios are calculated can be classified into six types:

1.      Liquidity ratio, this ratio to measure a company's ability to meet its short-term financial obligations.

2.      Leverage ratio, this ratio is used to measure how much the fund-supply by the owner of the company in proportion to the funds obtained from the company's creditors.

3.      Activity Ratio, this ratio is used to measure the effectiveness of management in the use of its resources. All the activity ratio involves a comparison between the level of sales and investments in various types of assets.

4.      Profitability ratio, this ratio is used to measure the effectiveness of management views on the profit generated on sales and investment companies.

5.      Growth ratio, this ratio is used to measure how well the company maintain its economic position of economic and industrial growth.

6.      Valuation Ratios, this ratio is a measure of achievement of the company's most complete because the ratio mencemirkan the combined effects of the risk ratio with the ratio of the return.

activity management
Financial management relate to three activities, namely:

1.      Activities use of funds, the activity to invest in various assets.

2.      Activities to raise, namely activities to obtain financial resources, both from internal funding sources as well as external funding sources.

3.      Asset management activities, that after funding acquired and allocated in the form of assets, the fund should be managed as efficiently as possible.

 

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