For a business firm, what type of activities does financial management involve?
It means planning, organizing, directing and controlling the financial activities of an enterprise.
Financial management revolves around the three major functions – financing funds, investing funds and distribution of surplus. For a business firm, financial management comprises all the activities concerned with the above three functions, including the following:
– Formulating financial strategy aligned with the organizational goals.
– Determining optimum composition of capital structure.
– Estimating capital requirements and preparing capital budgets.
– Selecting between various sources and types of funds.
– Effective investment of funds assuring profit maximization.
– Effective working capital and cash-flow management.
– Monitoring and evaluating financial performance by establishing controls.
– Distribution of surplus in the form of dividends or bonus issues.