meaning of Financial

Management
Financial Management
Management of funds is a critical aspect of
financial management. Management of funds act
as the foremost concern whether it is in a business
undertaking or in an educational institution.
Financial management, which is simply meant
dealing with management of money matters.
Meaning of Financial Management
By Financial Management we mean efficient use of
economic resources namely capital funds. Financial
management is concerned with the managerial
decisions that result in the acquisition and
financing of short term and long term credits for
the firm. Here it deals with the situations that
require selection of specific assets, or a
combination of assets and the selection of specific
problem of size and growth of an enterprise.
Herein the analysis deals with the expected inflows
and outflows of funds and their effect on
managerial objectives. In short, Financial
Management deals with Procurement of funds and
their effective utilization in the business.
Scope of Financial Management
Sound financial management is essential in all
types of organizations whether it be profit or non-
profit. Financial management is essential in a
planned Economy as well as in a capitalist set-up
as it involves efficient use of the resources.
From time to time it is observed that many firms
have been liquidated not because their technology
was obsolete or because their products were not in
demand or their labour was not skilled and
motivated, but that there was a mismanagement of
financial affairs. Even in a boom period, when a
company make high profits there is also a fear of
liquidation because of bad financial management.
Objectives of Financial Management
The objectives or goals or financial management
are-
(a) Profit maximization
(b) Return maximization
(c) Wealth maximization

Evolution of financial management

Financial management emerged as a distinct field of study at the
turn of this century. Its evolution may be divided into three broad
phases

The traditional phase

The transitional phase
The modern phase

The traditional phase lasted for about decades.

The following were its important features:

1. The focus of financial management was mainly on certain episodic

events like formation, issuance of capital, major expansion, merger,
reorganization, and liquidation in the life cycle of the firm.
2. The approach was mainly descriptive and institutional. The
instruments of financing, the institutions and procedures used in
capital markets, and the legal aspects of financial events formed the
core of financial management.

3. The outsider’s point of view was dominant. Financial

management was viewed mainly from the point of the investment
bankers, lenders, and other outside interests.

The transitional phase begins around the early forties and continues
through the early fifties. Though the nature pf financial mgmt
during this phase was similar to that of the traditional phase,
greater emphasis was placed on the day to day problem faced by the
finance managers in the area of funds analysis, planning, and
control. These problems however were discussed within limited
analytical framework.

The modern phase begin in mid 50s and has witnessed an

accelerated pace of development with the infusion of ideas from
economic theories and applications of quantitative methods of
analysis.