Introduction to Financial Management | Main Areas of Financial Management
Financial Management means planning, organizing, directing, and controlling the financial activities such as procurement and utilization of funds of the enterprise. OR
Financial management is concerned with the acquisition, financing, and management of assets with particular objectives. It is further divided into three main Areas;
1. Investment Decision
This decision relates to the careful selection of assets in which funds will be invested by the firms. A firm has many options to invest its funds but the firm has to select the most appropriate investment which will bring maximum benefit for the firm and deciding or selecting the most appropriate proposal is an investment decision.2. Financing Decision
The second important decision that a finance manager has to take is deciding the source of finance. A company can raise finance from various sources such as by issue of shares, debentures, or by taking loans and advances. Deciding how much to raise from which source is a concern of the financing decision. Mainly sources of finance can be divided into two categories:- Owners fund.
- Borrowed funds.
3. Asset Management Decision
Once the assets are acquired then it must be managed efficiently. The financial manager is then responsible for the overall management of those assets. What to do, how to invest, and where to invest?Assets include either intangible or tangible assets;
Intangible assets are things we cannot touch such as intellectual property, goodwill, financial assets, or human capital. Tangible assets, on the other hand, are things we can touch and including buildings, land, computers, or office equipment.
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