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What is meant by financial management? Definition of Financial Management is all company activities or activities related to how to obtain, use and manage company finances.
Financial management is a management activity that aims to manage funds and assets owned by the company to be used on things or activities that help achieve the company’s main goal, namely profit.
In a company or business, financial management has 3 main activities carried out by financial managers, namely:
These three things are related to internal and external funding sources of the company. Working capital and share ownership also include tasks in financial management. Deeper about the purpose and role of financial management in business will be discussed in full in this article.
Related article: Understanding of Management
The following is an explanation of financial management based on explanations from experts:
According to Bambang Riyanto, the notion of financial management is all company activities related to the business of obtaining the necessary funding with minimal costs and the most favorable conditions, and the effort to use these funds as efficiently as possible.
According to J. L. Massie, the notion of financial management is a business operational activity that is responsible for obtaining and using the funds needed for effective and efficient operational activities.
According to Agus Sartono, the notion of financial management is all that relates to the allocation of funds in various forms of effective investment and fundraising efforts for investment financing or for spending efficiently.
According to J. F. Bradley, financial management is a field of business management aimed at managing the use of capital wisely, selectively and carefully from the source of capital to enable the expenditure unit to move towards achieving its objectives.
According to Sonny S, the notion of financial management is a company activity that deals with how to get funds, use funds, and manage assets in accordance with the overall goals of the company.
According to Grestenberg, the notion of financial management is how a business is organized to obtain funds, how to obtain funds, use of these funds, and how the business is distributed.
According to Sutrisno, the meaning of financial management is all the activities of a company with efforts to obtain company funds with low costs and efforts to use and allocate these funds efficiently.
According to James VanHorne, the notion of financial management is all activities related to the acquisition of funds and management of funding, as well as for the management of assets with the aim of all company activities.
According to Weston and Copeland, the notion of financial management is a function and responsibility of financial managers. The main function of financial management is related to decisions about investment, financing business activities, and dividend distribution (read: Definition of Dividends) in a company.
As already explained in terms of financial management above as an effort to manage company assets, so this management has a special scope that must be understood by a manager including:
This includes all policies relating to how to obtain funds such as policies to issue bonds or policies to find short-term and long-term debt. The funds in question can be sourced from the company’s internal and external sources.
All related to the establishment of policies for investment such as fixed assets or fixed assets. Capital can be in the form of land, buildings or infrastructure, including production machinery. Investment (read: Definition of Investment) can also be in the form of financial assets such as securities, stocks and bonds.
Policies relating to asset management efficiently to achieve company goals.
The above has been explained that financial management is carried out as a process to control company assets, especially in the form of funds. So that financial management has several goals that must be achieved, including:
Through appropriate policies, financial management can maximize the company’s profits in the long run.
Financial managers play a role in maintaining cash flow. Every day the company will certainly issue funds for example for the purchase of raw materials, payment of member salaries, rent and other payments. So that if it is not monitored and controlled it can cause an overbudget that is detrimental to the company.
Balancing the financing that is owned with borrowed funds. The aim is to prepare a capital structure.
Financial managers act to oversee the use of company money. The budget used for activities that do not benefit the company can be cut and allocated for other activities.
Financial managers strive to provide maximum dividends to shareholders and strive to improve the stock market because it is related to company performance.
Financial managers strive to improve the efficiency of all departments within the organization. Proper distribution of funds in all aspects will have an impact in increasing the efficiency of the company.
Companies can survive in competitive business competition which is the role of the finance department. Decisions related to finance must be carried out carefully because misuse of finance can lead to bankruptcy.
With good financial management, operational risks can be minimized. Risk of uncertainty in business must be addressed with the right decisions by financial managers.
Capital structure planning must be made in such a way by financial managers so that the use of capital costs can be minimized.
Finance is the most risky component for a business or company. Finance needs to be managed and controlled properly by a financial manager. This is related to the company’s ability to survive in the financial sector.
The following are some of the financial management functions:
All company activities that are related to the use of company budget funds need to be planned properly. So that activities are not profitable, the budget can be cut or cut. Allocation of funds needs to be considered for things that can maximize company profits.
Every activity that has been carried out requires a financial evaluation. So that it can be a reference for carrying out further activities.
Financial related internal audits need to be done so that they are in accordance with the rules of accounting standards and there are no deviations.
With the existence of financial management, then every year there will be financial reporting that is useful for analyzing the company’s profit and loss report ratio.
Thus a complete explanation of the notion of financial management, functions, goals and roles in the company. Hopefully this article is useful and adds to your knowledge.