Financial Management - A Tool For Effective Educational Survival

By Financial Management we mean efficient use of economic resources namely capital funds. Financial management is concerned with the managerial decisions that result in the acquisition and financing of short term and long term credits for the firm. Here it deals with the situations that require selection of specific assets, or a combination of assets and the selection of specific problem of size and growth of an enterprise. Herein the analysis deals with the expected inflows and outflows of funds and their effect on managerial objectives. In short, Financial Management deals with Procurement of funds and their effective utilization in the businessProcurement of funds:
As funds can be obtained from different sources so procurement of funds is considered as an important problem of business concerns. Funds procured from different sources have different characteristics in terms of risk, cost and control.
Funds issued by the issue of equity shares are the best from risk point of view for the company as there is no question of repayment of equity capital except when the company is under liquidation.
From the cost point of view equity capital is most expensive source of funds as dividend expectations of shareholders are normally higher than prevalent interest rates.
Financial management constitutes risk, cost and control. The cost of funds should be at minimum for a proper balancing of risk and control.
In the globalised competitive scenario mobilization of funds plays a very significant role. Funds can be raised either through domestic market or from abroad. Foreign Direct Investment (FDI) as well as Foreign Institutional Investors(FII) are two major sources of raising funds. The mechanism of procurement of funds has to be modified in the light of requirements of foreign investors.