Financial management is an activity arranging, budgeting, audit, administration, control, search and storage space of money owned by an organization or company. management Activities
Financial management related to the three activities, namely:
Activities use of funds, the activity to invest in various assets.
Activities proceeds, namely activities to obtain financial resources, both from internal funding sources along with external funding sources.
Asset management activities, namely after the money obtained and allocated in the form of assets, the fund should be managed as effectively as possible.
A finance manager in a company must know how to manage all the elements and in economic terms, this must be done because finance is among the important functions in achieving the objectives of the company.
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, the financial manager should be able to find out all the activities of financial administration, especially analyzing the source and use of its funds to realize the maximum benefit for the company. A financial manager must understand the circulation of money in circulation, both external and internal.
Financial Management Function
Here is a brief explanation of the function of Financial Administration:
Financial planning, cash flow and expenditure to make plans as well as other activities for a certain period.
Financial budgeting, follow-up of economic planning by making details of expenditures and revenues.
Financial Management, used business funds to maximize the funds available by various means.
Finance search, discover and exploit the solutions available for the operational activities of the company.
Financial storage, raising the company along with storing and securing these money.
Financial control, evaluation and improvement of funds and financial systems in the enterprise.
Audit, inner audit on the existing corporate finance to avoid deviations.
Financial reporting, providing information about the financial condition of the company along with an evaluation
When associated with this objective, the economic manager functions include the following:
Supervision over costs
Setting a price policy
Predicting the future earnings
Measuring or explore the price of working capital
Objectives of Financial Management
Objectives of Financial Administration is to maximize the value of the company. Thus, if one day the company is sold, then the price can be set as substantial as possible. A manager should also be able to reduce the flow of money in circulation in order to avoid unwanted actions.
Analysis of Funding Resources and Uses
Analysis of the source of money or fund analysis is essential for the financial manager. This analysis is useful to know how money 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 application that can be used to determine the condition and financial overall performance of the company is the evaluation of the ratio and proportion.
The first step in the evaluation of the source and use of funds is a report of the adjustments prepared on the basis of two balance sheets for two times. The statement describes the change of each of these components that reflect their resource or use of funds.
In general, economic ratios are calculated can be grouped into six types:
Liquidity ratio, this ratio to assess a company’s ability to meet its short-term financial obligations.
Leverage ratio, this ratio is used to measure how much of the money that are supplied by the owner of the company in proportion to the money obtained from the company’s creditors.
Activity Ratio, this ratio is used to measure the effectiveness of administration in the use of its resources. All the activity ratio requires a comparison between the level of sales and investments in various kinds of treasure.
Profitability ratio, this ratio is used to measure the effectiveness of administration as noticed from the income generated on product sales and investment companies.
Development ratio, this ratio is used to measure how well the company maintain its economic position of financial and industrial growth.
Valuation Ratios This ratio is definitely a measure of the company’s achievements of the most complete because of these ratios reflect the mixed effects of the risk ratio with the ratio of the come back.
Definition of Capital
The term “capital” is usually interpreted to mean many things, the terms of capital expenditures the company can be divided into two, namely: capital lively and passive capital. Lively capital is the wealth or the use of money, while passive capital is definitely a source of funds.
Financial manager is someone who has the right to take a decision that is very important in the field of investment and financing business. The financial manager is also responsible for the economic sector in a business.
Understanding Functions and Goals of Financial Management. Description of Financial Management
Financial management is definitely any activity or activities of the company related to how to obtain working capital financing, make use of or allocate, and manage property to achieve the main objectives of the company.
Objectives of Financial Management
The main objective of Financial Administration is to maximize the value of the company or provide added worth to the property owned by shareholders.
Scope of Financial Management
Scope of Financial Administration consists of:
Funding decision, including administration guidelines in the search company’s funds, such as policies issued numerous bonds and debt plan short and lengthy term business sourced from inner and external.
Investment Decision, Policy venture capital investment to fixed property or Fixed Assets such as buildings, land and products or machinery, along with financial assets in the form of securities such as shares and bonds or activity to invest in various assets.
Decisions Asset Management, property management policy efficiently to accomplish its goals.
Financial Management Function
The main function of Financial Administration are as follows:
Planning or Financial Arranging, Cash Flow Planning covers and Cash flow.
Budgeting or price range, reception planning and price range allocation effectively and maximize cost-owned money.
Controlling or Financial Control, evaluation and improvement of funds and financial systems.
Auditing or Audit, inner audit for the economic companies to comply with existing rules and accounting standards to prevent deviation.
Reporting or Financial Reporting, provide information reviews about the company’s financial condition and ratio evaluation of financial statements.
Financial Ratio Analysis
The analysis tool that is often used to determine the condition and financial overall performance of the company. Benchmark typically by comparing the boost or decrease in achievement between the two statements of financial position at two specific time period.
Financial Ratio Analysis generally used are grouped as follows:
Liquidity Ratio, the ratio for assessing the company’s ability to meet all financial obligations in the short term. Reports in the form of analysis and Functioning Capital Current Ratio to Total Property (WCTAR).
Leverage Ratio, the ratio to assess the extent of the money provided by the shareholders or owner as compared with funds acquired from loans from the creditors. Reports in the form of Total Debt to Property (DAR), Total Personal debt to Equity (DER).
Activity Ratio, this ratio is used to measure the effectiveness of administration in the use of its resources. All the activity ratio requires a comparison between the level of sales and investments in various types of assets. Evaluation report in the form of Total Asset Turn Over (ATO), Working Capital Turn Over (WCTO), Total Equity to Total Property (EA).
Rentability Ratio, this ratio is used to assess the effectiveness of administration as noticed from the income generated on product sales and investment businesses. The report analyzes the form of Return on Equity (ROE), Return on Property (ROA), Earning Electric power of to Total Expense (EPTI), Gross Profit Margin (GPM), and Operating Cash flow (OI).