What Is Nature And Scope Of Financial Management?

The nature of financial management is the relationship with economics and accounting, its functions and its scope. Financial management is the way and the means of making money, the application of the functions of planning and control to the finance function.

The modern approach to financial management is to find out how much money is required by the company in question, and then to source at least that amount. The amount should then be invested to ensure that the objectives of the financial management and the company as a whole are met. To break this down into simple terms, financial management have the responsibility to estimate the funds required, raise the funds and finally to invest the funds.

When raising finance a financial management team should ensure that they strike a balance of owned and borrowed funds. This is simply so the company does not have too big an amount of debt on its hands. Once the funds have been raised it is important to spend them wisely, normally on fixed assets and using the balance as working capital. Fixed assets should only be purchased if they can add value to the business, especially long-term value. Most fixed assets that would be purchased by a company will be expensive so they need to be able to produce work for a considerable period of time.

Working capital will be required for the day-to-day running of the company, and for emergencies. This working capital should not be too large as spare money may gain interest in the bank but it should be cycled back into the company.

An important decision of financial management is how much to pay the shareholders, and how much to retain as working capital for the business. Shareholders expectations, and the company performance as a whole, need to be taken into consideration when making this decision.

Financial Management is an important field of Management Sciences. It is a combination of Managerial Finance and Corporate Finance. Managerial Finance concerns with the managerial use of financial techniques. Whereas on the other hand, Corporate finance deals with corporate financial decisions.

In both the cases, it is extremely important for Managers in an organization. Financial Management is used to determine the best way to use the money available to an organization in order to improve the future opportunities to earn money. Thus the financial managers use techniques such as Valuation, Portfolio management, Hedging and capital structure etc for better decisions about the future of an organization.

On the other hand, it is also used to interpret financial results in a given year or time period using financial analysis techniques. This helps in judging the actual performance of an organization in that time period. Financial management helps in proper allocation of costs, anticipate future expense, and budgeting for the future.

Hat Is Nature And Scope Of Financial Management?

Financial management is duplicate with financial function of the accounting profession. However, financial accounting is more concerned with the reporting of the historical financial information, while the financial management decision is directed toward the future of the firm. Money markets and capital markets come in the financial management.

Financial Management is one of the important aspects of finance. Nobody can ever think to start a business or a company without financial knowledge and management strategies. Finance links itself directly to several functional departments like marketing, production, and personnel.  Here we will list out some of the major scopes of financial management notes which will help you in your decision-making process.

Key Scope of Financial Management:
The major scope of financial management is divided into four categories.

• Investment Decision
  
• Working Capital Decision
  
• Dividend Decision
  
• Financing Decision
  

Financial management is the application of general management principles to a specific financial operation . It include three major decisions : Investing,financing and dividend.

Explain the nature of financial management

Financial is used by individuals by governments, by businesses  as well as by a wide variety of organizations. In general,the  goals of each of the above activities are achieved through the use of appropriate financial instruments with consideration to their institutional setting.