Scope of Financial Management
Financial management is a vital component of success and sustainability for organizations across industries because it encompasses a broad range of activities and responsibilities designed to manage an organization’s financial resources efficiently.
A wide variety of functions and decisions fall under the umbrella of financial management, including financial planning and capital budgeting, working capital management, risk mitigation, and financial analysis.
Financial management involves strategic planning, operational execution, and monitoring of financial activities in order to ensure that the organization is financially stable, profitable, and growing over the long run.
Financial management describes the range of activities and responsibilities involved in managing the financial resources of an organization effectively.
In addition to maximizing the value of the company, financial management ensures financial stability and sustainability by combining various functions, decisions, and strategies.
Let’s take a closer look at the scope of financial management:
Financial Planning:
➔ The goal of financial planning is to develop a roadmap for a company’s financial activities. It begins with identifying short-term and long-term financial goals and objectives.
➔ It may be necessary to increase profitability, expand operations, invest in research, or enter new markets to achieve these objectives.
➔ It is also important to estimate the financial requirements to achieve these goals, taking into account factors such as operating expenses, capital expenditures, and working capital requirements.
➔ Financial managers develop strategies to allocate resources effectively, prioritize investments, and ensure the organization’s financial stability and sustainability based on these estimates.
| Example: John, 30, aims for financial stability by building a three-month emergency fund, contributing 15% to his retirement with employer matching, and strategically managing expenses, debt, and investments for a secure future. |