IMPORTANCE OF FINANCIAL MANAGEMENT
Finance is the lifeblood of business organization. It needs to meet the requirement of the
business concern. Each and every business concern must maintain adequate amount of
finance for their smooth running of the business concern and also maintain the business
carefully to achieve the goal of the business concern. The business goal can be achieved
only with the help of effective management of finance. We can’t neglect the importance of
finance at any time at and at any situation. Some of the importance of the financial
management is as follows:
Financial management helps to determine the financial requirement of the business concern
and leads to take financial planning of the concern. Financial planning is an important part
of the business concern, which helps to promotion of an enterprise.
Acquisition of Funds
Financial management involves the acquisition of required finance to the business concern.
Acquiring needed funds play a major part of the financial management, which involve
possible source of finance at minimum cost.
10 Financial Management
Proper Use of Funds
Proper use and allocation of funds leads to improve the operational efficiency of the business
concern. When the finance manager uses the funds properly, they can reduce the cost of
capital and increase the value of the firm.
Financial management helps to take sound financial decision in the business concern.
Financial decision will affect the entire business operation of the concern. Because there is
a direct relationship with various department functions such as marketing, production
Profitability of the concern purely depends on the effectiveness and proper utilization of
funds by the business concern. Financial management helps to improve the profitability
position of the concern with the help of strong financial control devices such as budgetary
control, ratio analysis and cost volume profit analysis.
Increase the Value of the Firm
Financial management is very important in the field of increasing the wealth of the investors
and the business concern. Ultimate aim of any business concern will achieve the maximum
profit and higher profitability leads to maximize the wealth of the investors as well as the
Savings are possible only when the business concern earns higher profitability and
maximizing wealth. Effective financial management helps to promoting and mobilizing
individual and corporate savings.
Nowadays financial management is also popularly known as business finance or
corporate finances. The business concern or corporate sectors cannot function without
the importance of the financial management.