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Finman 2a

Financial management is a functional unit that sets policies for organizing, planning, controlling, and directing a business's financial resources. It coordinates different business functions and is responsible for investment decisions, financing decisions, and operating decisions. Financial managers play an important role by guaranteeing returns on investment, examining financial performance, planning the use of financial resources, ensuring efficient operations, building controls, and developing confidence through efficient financial planning and control of funds. Key responsibilities of financial managers include raising needed funds, properly allocating financial resources, planning for profit, and having knowledge of capital markets. An example of a successful financial manager is Warren Buffett, who runs the large holding company Berkshire Hathaway.

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Chloe Ann Cabaylo
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49 views3 pages

Finman 2a

Financial management is a functional unit that sets policies for organizing, planning, controlling, and directing a business's financial resources. It coordinates different business functions and is responsible for investment decisions, financing decisions, and operating decisions. Financial managers play an important role by guaranteeing returns on investment, examining financial performance, planning the use of financial resources, ensuring efficient operations, building controls, and developing confidence through efficient financial planning and control of funds. Key responsibilities of financial managers include raising needed funds, properly allocating financial resources, planning for profit, and having knowledge of capital markets. An example of a successful financial manager is Warren Buffett, who runs the large holding company Berkshire Hathaway.

Uploaded by

Chloe Ann Cabaylo
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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DEFINITION OF FINANCIAL MANAGEMENT

- It is a functional unit of a business organization that sets policies towards organizing, planning,
controlling and directing the proper use an allocation of its financial resources.
- It carries an interlocking coordination within the business structure such as production,
marketing , logistics and personal functions.
- -it is considered to be one of the most significant responsibilities within the business entity.

IMPORTANCE OF FINANCIAL MANAGEMENT

- Financial management focuses on the ff areas


1. Investment decision ( capital budgeting or financial plan preparation
2. Financing decision ( creating the best financing mix, capital structure)
3. Operating decision ( cost control, strategies to increase revenue)

The financial management function is important in business organization

1. Guarantee rational and attractive return on investment made in the business


2. Examine business financial performance for growth and expansion
3. Plan, direct and control the use of financial resources
4. Ensure maximum and efficient flow of operations
5. Create pleasant and amiable relations with company stakeholder
6. Harmonize operations of different facets of the business
7. Build up appropriate controls to secure proper use of financial resources

FUNDAMENTAL CONCEPTS IN FINANCIAL MANAGEMENT

Financial management is in charge of efficient planning and control of funds inflow and outflow

1. The appropriate magnitude or volume of funds needed for efficient operations ( capitalization_
2. The wise allocation of financial resources to particular resources
3. The short and long term fund raising activities

Research , Time and Knowledge

An extensive amount of research, time and in deep knowledge us needed to make these financial
information relevant.

Cost – an appropriate cost is necessary to attract this type of personnel

Revision and Attention- Constant study and undivided attention will be needed to identify these factors
and make adjustments on the company’s financial plans and objectives

Power – Financial managers are given power to make judgement call specially the operations of the
business will be affected.

Money Availability and Planning – managing finances results to being able to identify the sources and
uses of it. They may be able to predict money availability or possible shortage of it
Accountability – Financial management focuses on various control procedures related to the use of
financial resources. Those involved need to monitor and make sure compliance is done to every set of
procedures and policies with regard to the management of company’s financial resources

Confidence – Financial management adds value and develops more confidence in the sense that this
aspect of management put strong emphasis on efficient planning and control on the inflow and outflow
of funds.

ROLE OF THE FINANCIAL MANAGERS

1. Raise needed funds for the business operations


- FM ensures that the company meets its obligation and required funds needed for the business.
- He needs to constantly monitor the liquidity, solvency and profitability by way of establishing
prudent financial procedures and policies
- The company can raise funds either thru equity or debt financing
- Decide on what option to choose from
2. Proper allocation of financial resources

The needs to be considered in order to make proper allocation of funds

a. The business entity size and its capability for possible growth
b. Status of assets where the funds will be used ( shirt term or long term)
c. Manner on which the funds are raised
3. Profit Planning
Profit is an inherent component to ensure business sustainability and survival. Thus profit
planning requires tremendous amount of rational forecasting of revenues and management of
cost and expenses
Among the factors that impact on business profit are product pricing, competition, economic
status, demand and supply, product costs and output
The FM should be able to keep an eye on all these factors in order to make desirable and realistic
financial plans to achieve the desired profits
4. Knowledge of Capital Markets

The FM should be able to make strong calculations and analysis of the various risks involved in
the trading of shares and securities.

EXAMPLE OF A SUCCESFUL FINANCIAL MANAGER


Warren Buffet – Known as the “Oracle of Omaha” Warren buffet is most successful investor of all
time.
He runs Berkshire Hathaway which owns dozens of companies from finance ( insurer Geico),
battery maker ( Duracell) restaurant chain ( dairy queen)
He first bought stock t age 11 and filed his 1 st tax at age 15
He has promised to donate over 99% of his wealth . so far he has given more than 1B, mostly to
the Gates foundation and his kids’ foundation
In 2010, he and Bill gates launched the Giving Pledge, asking Billionaires to commit to donating
at least half of their wealth to charitable causes.
Buffet still lives in the same Omaha, Nebraska home he purchased in 1958 for $31,500.

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