Financial management is a business function that deals with the resources and expenses of an organization. Its focus is on the organization’s ability to achieve its objectives by minimizing costs and maximizing profitability. In a nutshell, financial management is about the control of cash and credit flows. In short, it is about ensuring that the business is solvent and able to meet its obligations.
Financial managers allocate funds and capital to ensure that the company has enough funds for day-to-day operations and growth. They may seek funding from private equity firms, sell assets, or raise equity. But before they can pursue these options, they must have adequate cash on hand to meet day-to-day expenses, purchase raw materials, and invest in new ventures. To accomplish this, the financial manager will create a budget for the organization. This budget may be static, or may be flexible to meet changing needs.
Financial managers also analyze a company’s capital structure. They need to calculate how much capital it needs to start operations and grow, and what mix of debt and equity is needed. Financial management covers two main branches of finance: corporate finance and managerial finance. The former deals with the daily decisions of a company, while the latter deals with longer-term capital budgeting.
Financial management focuses on the planning, direction, and control of the company’s financial resources. The field also stresses the application of financial quantification techniques. In addition, financial managers use available data to evaluate the performance of an enterprise. The field of financial management is interdisciplinary, borrowing from other disciplines such as corporate finance and managerial accounting.