Finance Management

Posted by Burki on September 18th, 2010

Financial Management consists of three key elements:

1. Financial Planning:

For any organization either profitable or non profitable need to manage financing resources which make it able to ensure that adequate fund and source available to meet the need of organization business.

2-Financial Control:

For any business financial control is the back bone of business to achieve there objectives.

Financial control mainly deal with are the business asset secure?

Are business assets utilizing properly ?,

Are the business doing in sherholders interest?

3-Financial Decision:

Financial decision mainly connected with the investment, financing and dividends,

Every organization must financied in one way or other but they also have alternate way which can be considered.

The most important and financial decision making is whether the profit earn by business should retain or distribute among the shareholders, if the dividend is high, it may reinvest in business to grow future profit.

What is Working Capital?

Current Assets minus currents liability of business are called working capital.

Current Assts                                                                                    Current Liabilities

W-I-P                                                                            Short term loans

Finished goods                                                             Tax-payable

Pre-Payments                                                                                  

Cash Balance                                                               Dividend Payable

For day to day transaction every business need liquid resources to maintain day to day cash flow, every business need to keep adequate cash to pay due wages and salaries and to pay creditors, to ensure keep running.

Working capital not important only for short term, liquid resources also very important to maintain it to ensure the survival of the business in long term as well,

Any successful business depend upon the maintain of cash flow, even profitable business can be fail if it fail to maintain cash flow to meet its liabilities.

Therefore before making business investment  decision it is most important to consider not only the financial outlay  involved in acquiring new machinery, building, but also other current assets which is involved in day to day business operation.

Different business needs different working capital, depend upon there method of doing business.

?Business like supermarkets involve in plenty cash sell must have a minimum trade debater.

?Trade base business only has finished goods in stock, as compare with the manufacture that need to   maintain raw-material, work in process.

?Business involve in selling foods, vegetable and other perishable goods have to be sold in limited time frame.

?Larger companies have a good will which favorable in getting favorable credit terms from supplier. Beside the small companies or those businesses which is recently started their business may require paying their supplier in cash, so both working capital need will be different.