Financial Management

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 Submit Date:
25 December 2015
Submitted to:
Professor –
Dr. Anisur Rahman
Universityof SouthAsia
Sub: Financial Management
 Course Title:
Sample-
 Definitionof Financial Management
 Scope of Financial Management
 Functionof Financial Manager
 Importance of Financial Management
 Limitation of Financial Management
 Prepared By -
Md. Main Uddin
151-0089-009
FINANCIAL MANAGEMENT

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25th
December
Dr. Anisur Rahmn
Course Instructor
Financial Management
University of South Asia
Banani, Dhaka
Subject: Submission of assignment on “Financial Management ” .
Dear Sir,
My Assignment is on “Financial Management” as a requirement of the Financial Management course. I
have tried to follow the instructions and suggestions that you have given us for completing the course
work.
This report helped me to understand the reason why we choose these.
I hope that my assignment will make properly.
Sincerely yours
Name : Md. Main Uddin
ID : 151 – 0089 - 009
Letter of transmittal

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Contents
Caver page _____________________________________1
Application _____________________________________2
Contents _______________________________________3
Acknowledgements ______________________________4
Introduction ____________________________________5
Question and Answers:
01. Define Financial Management ? ___________6
02. Explain The Scope of Financial Management ?
______________________________________7-8
03. Discuss The Function of Financial Manager?
_____________________________________9-10
04. Write Down the Importance & Limitation of
Financial Management? __________10-11-12-13
Conclusion ____________________________________14
References __________________________________14-15

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 Acknowledgement
I would like to express my heartiest gratitude to our professor, Dr. Anisur Rahman, Course
– Financial Management, University of South Asia for his tremendous help and
encouragement. He gave our necessary advices and guidelines; provided me with relevant
materials and directed me where and how to get necessary data and information for our
study.
providing valuable comments and suggestions during dissertation presentation.
For collecting data for my assignment, from Internet & Book.
Name : Md. Main Uddin
ID : 151 – 0089 - 009
University of South Asia
December 2015

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INTRODUCTION:
Business concern needs finance to meet their requirements in the economic world. Any
kind of business activity depends on the finance. Hence, it is called as lifeblood of business
organization. Whether the business concerns are big or small, they need finance to fulfil
their business activities.
In the modern world, all the activities are concerned with the economic activities and
very particular to earning profit through any venture or activities. The entire business
activities are directly related with making profit. (According to the economics conceptof
factors of production, rent given to landlord, wage given to labour, interest given to capital
and profit given to shareholders or proprietors), a business concern needs finance to meet
all the requirements. Hence finance may be called as capital, investment, fund etc., but
each term is having different meanings and unique characters. Increasing the profit is the
main aim of any kind of economic activity.
Meaning of Finance-
Finance may be defined as the art and science of managing money. It includes financial
service and financial instruments. Finance also is referred as the provision of money at the
time when it is needed. Finance function is the procurement of funds and their effective
utilization in business concerns.
The conceptof finance includes capital, funds, money, and amount. But each word is
having unique meaning. Studying and understanding the conceptof finance become an
important part of the business concern.

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DEFINATION OF FINANCE:
1. Define Financial Management?
According to Khan and Jain, “Finance is the art and science of managing money”.
According to Oxford dictionary, the word ‘finance’ connotes ‘management of money’.
Webster’s Ninth New Collegiate Dictionary defines finance as “the Science on study
of the management of funds’ and the management of fund as the system that includes the
circulation of money, the granting of credit, the making of investments, and the provision
of banking facilities.
DEFINITION OF BUSINESS FINANCE
According to the Wheeler, “Business finance is that business activity which concerns
with the acquisition and conversation of capital funds in meeting financial needs and overall
objectives of a business enterprise”.
According to the Guthumann and Dougall, “Business finance can broadly be defined
as the activity concerned with planning, raising, controlling, administering of the funds
used in the business”.
DEFINITION OF FINANCIAL MANAGEMENT-
Financial management is an integral part of overall management. It is concerned with the
duties of the financial managers in the business firm.
The term financial management has been defined by Solomon, “It is concerned with
the efficient use of an important economic resource namely, capital funds”.
The most popular and acceptable definition of financial management as given by S.C.
Kuchal is that “Financial Management deals with procurement of funds and their effective
utilization in the business”.
Howard and Upton : Financial management “as an application of general managerial
principles to the area of financial decision-making.
Westonand Brigham : Financial management “is an area of financial decision-making,
harmonizing individual motives and enterprise goals”.
Joshepand Massie : Financial management “is the operational activity of a business
that is responsible for obtaining and effectively utilizing the funds necessary for efficient
operations. Thus, Financial Management is mainly concerned with the effective funds
management in the business. In simple words, Financial Management as practiced by
business firms can be called as Corporation Finance or Business Finance.

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 SCOPE OF FINANCIAL MANAGEMENT:
2. Explain The Scope of Financial Management?
Financial management is one of the important parts of overall management, which is
directly related with various functional departments like personnel, marketing and
production.
Financial management covers wide area with multidimensional approaches. The following
are the important scopeof financial management.
1. FinancialManagementand Economics
Economic concepts like micro and macroeconomics are directly applied with the financial
management approaches. Investment decisions, micro and macro environmental factors are
closely associated with the functions of financial manager.
Financial management also uses the economic equations like money value discount factor,
economic order quantity etc. Financial economics is one of the emerging area, which
provides immense opportunities to finance, and economical areas.
2. FinancialManagementand Accounting
Accounting records includes the financial information of the business concern.
Hence, we can easily understand the relationship between the financial management and
accounting. In the olden periods, both financial management and accounting are treated as a
same discipline and then it has been merged as Management Accounting because this part is
very much helpful to finance manager to take decisions. But now a day’s financial
management and accounting discipline are separate and interrelated.
3. FinancialManagementor Mathematics
Modern approaches of the financial management applied large number of mathematical and
statistical tools and techniques. They are also called as econometrics. Economic order
quantity, discountfactor, time value of money, present value of money, cost of capital,
capital structure theories, dividend theories, ratio analysis and working capital analysis are
used as mathematical and statistical tools and techniques in the field of financial
management.

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4. FinancialManagementand Production Management
Production management is the operational part of the business concern, which helps to
multiple the money into profit. Profit of the concern depends upon the production
performance. Productionperformance needs finance, because productiondepartment
requires raw material, machinery, wages, operating expenses etc. These expenditures are
decided and estimated by the financial department and the finance manager allocates the
appropriate finance to productiondepartment.
The financial manager must be aware of the operational process and finance required for
each process ofproductionactivities.
5. FinancialManagementand Marketing
Produced goods are sold in the market with innovative and modern approaches.
For this, the marketing department needs finance to meet their requirements.
Introduction to Financial Management 5
The financial manager or finance department is responsible to allocate the adequate
finance to the marketing department. Hence, marketing and financial management
are interrelated and depends on each other.
6. FinancialManagementand Human Resource
Financial management is also related with human resource department, which provides
manpower to all the functional areas of the management. Financial manager should
carefully evaluate the requirement of manpower to each department and allocate the finance
to the human resource department as wages, salary, remuneration, commission, bonus,
pension and other monetary benefits to the human resource department. Hence, financial
management is directly related with human resource management.

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 FUNCTIONS OF FINANCE MANAGER :
3. Discuss The Function of Financial Manager?
Finance function is one of the major parts of business organization, which involves the
permanent, and continuous process ofthe business concern. Finance is one of the
interrelated functions which deal with personal function, marketing function, production
function and research and development activities of the business concern. At present, every
business concern concentrates more on the field of finance because, it is a very emerging
part which reflects the entire operational and profit ability position of the concern. Deciding
the proper financial function is the essential and ultimate goal of the business organization.
Finance manager is one of the important role players in the field of finance function.
He must have entire knowledge in the area of accounting, finance, economics and
management. His position is highly critical and analytical to solve various problems related
to finance. A personwho deals finance related activities may be called finance manager.
Finance manager performs the following major functions:
1. Forecasting FinancialRequirements
It is the primary function of the Finance Manager. He is responsible to estimate the financial
requirement of the business concern. He should estimate, how much finances required to
acquire fixed assets and forecastthe amount needed to meet the working capital
requirements in future.
2. Acquiring NecessaryCapital
After deciding the financial requirement, the finance manager should concentrate
how the finance is mobilized and where it will be available. It is also highly critical
in nature.
3. Investment Decision
The finance manager must carefully select best investment alternatives and consider the
reasonable and stable return from the investment. He must be well versed in the field of
capital budgeting techniques to determine the effective utilization of investment. The
finance manager must concentrate to principles of safety, liquidity and profitability while
investing capital.
4. CashManagement
Present days cashmanagement plays a major role in the area of finance because propercash
management is not only essential for effective utilization of cashbut it also helps to meet
the short-term liquidity position of the concern.

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5. Interrelation with Other Departments
Finance manager deals with various functional departments such as marketing, production,
personnel, system, research, development, etc. Finance manager should have sound
knowledge not only in finance related area but also well versed in other areas. He must
maintain a good relationship with all the functional departments of the business
organization.
 IMPORTANCE OF FINANCIAL MANAGEMENT :
4. Write Down the Importance & Limitation of Financial
Management?
Finance is the lifeblood of business organization. It needs to meet the requirement of the
business concern. Each and every business concern must maintain adequate amount of
finance for their smooth running of the business concern and also maintain the business
carefully to achieve the goal of the business concern. The business goal can be achieved
only with the help of effective management of finance. We can’t neglect the importance of
finance at any time at and at any situation. Some of the importance of the financial

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Management is as follows:-
FinancialPlanning
Financial management helps to determine the financial requirement of the business concern
and leads to take financial planning of the concern. Financial planning is an important part
of the business concern, which helps to promotion of an enterprise.
Acquisition of Funds
Financial management involves the acquisition of required finance to the business concern.
Acquiring needed funds play a major part of the financial management, which involve
possible sourceof finance at minimum cost.
ProperUse of Funds
Properuse and allocation of funds leads to improve the operational efficiency of the
business concern. When the finance manager uses the funds properly, they can reduce the
costof capital and increase the value of the firm.
FinancialDecision
Financial management helps to take sound financial decision in the business concern.
Financial decision will affect the entire business operation of the concern. Because there is
a direct relationship with various department functions such as marketing, production
personnel, etc.
Improve Profitability
Profitability of the concernpurely depends on the effectiveness and proper utilization of
funds by the business concern. Financial management helps to improve the profitability
position of the concernwith the help of strong financial control devices such as budgetary
control, ratio analysis and costvolume profit analysis.
Increase the Value of the Firm
Financial management is very important in the field of increasing the wealth of the investors
and the business concern. Ultimate aim of any business concern will achieve the maximum
profit and higher profitability leads to maximize the wealth of the investors as well as the
nation.
Promoting Savings
Savings are possible only when the business concernearns higher profitability and
maximizing wealth. Effective financial management helps to promoting and mobilizing
individual and corporatesavings.
Nowadays financial management is also popularly known as business finance or
corporatefinances. The business concern or corporate sectors cannot function without
the importance of the financial management.

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 LIMITATION OF FINANCIAL MANAGEMENT :
The limitations of financial statements are those factors that a user should be aware of
before relying on them to an excessive extent. Knowledge of these factors could result in a
reduction of invested funds in a business, or actions taken to investigate further.
The following are all limitationsoffinancial statements:
 Dependence on historical costs.- Transactions are initially recorded at their cost.
This is a concern when reviewing the balance sheet, where the values of assets and
liabilities may change over time. Some items, such as marketable securities, are
altered to match changes in their market values, but other items, such as fixed assets,
do not change. Thus, the balance sheet could be misleading if a large part of the
amount presented is based on historical costs.
 Inflationary effects.- If the inflation rate is relatively high, the amounts associated
with assets and liabilities in the balance sheet will appear inordinately low, since they
are not being adjusted for inflation. This mostly applies to long-term assets.
 Intangible assets not recorded.- Many intangible assets are not recorded as
assets. Instead, any expenditures made to create an intangible asset are immediately
charged to expense. This policy can drastically underestimate the value of a business,
especially one that has spent a large amount to build up a brand image or to develop
new products. It is a particular problem for startup companies that have created
intellectual property, but which have so far generated minimal sales.
 Based on specific time period. A user of financial statements can gain an
incorrect view of the financial results or cash flows of a business by only looking at
one reporting period. Any one period may vary from the normal operating results of a
business, perhaps due to a sudden spike in sales or seasonality effects. It is better to
view a large number of consecutive financial statements to gain a better view of
ongoing results.

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 Not always comparable across companies. If a user wants to compare the
results of different companies, their financial statements are not always comparable,
because the entities use different accounting practices. These issues can be located by
examining the disclosures that accompany the financial statements.
 Subject to fraud. The management team of a company may deliberately skew the
results presented. This situation can arise when there is undue pressure to report
excellent results, such as when a bonus plan calls for payouts only if the reported
sales level increases. One might suspectthe presence of this issue when the reported
results spike to a level exceeding the industry norm.
 No discussion of non-financial issues. The financial statements do not address
non-financial issues, such as the environmental attentiveness of a company's
operations, or how well it works with the local community. A business reporting
excellent financial results might be a failure in these other areas.
 Not verified. If the financial statements have not been audited, this means that no
one has examined the accounting policies, practices, and controls of the issuer to
ensure that it has created accurate financial statements. An audit opinion that
accompanies the financial statements is evidence of such a review.
 No predictive value. The information in a set of financial statements provides
information about either historical results or the financial status of a business as of a
specific date. The statements do not necessarily provide any value in predicting what
will happen in the future. For example, a business could report excellent results in
one month, and no sales at all in the next month, becausea contract on which it was
relying has ended.
Financial Management are normally quite useful documents, but it can pay to be aware of
the preceding issues before relying on them too much.

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Conclusion:
The Financial Management describes the principal processes in managing the
financial aspect of the organization, addresses financial risk as part of these
processes, and discusses the means to measure the value realized from IT
solutions.
The major financial management processes described by the Financial
Management are:
 Establish service requirements and plan budget.
 Manage finances.
 Perform accounting and reporting.
REFERENCES
Brigham, E. F. and Ehrhardt, M. C. 2011. Financial Management: Theory and
Practice. 13 th ed.
Cengage Learning.
Carey, A. 2001. Effective risk management in financial institutions: the turnbull
approach.
Balance Sheet. 9(3). pp.24-27.
Fairchild, R. 2002. Financial risk management: is it a value-adding activity?.
Balance Sheet.
10(4). pp.22-25.

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Flynn, D. K. Uliana, E. and Wordmald, M. 2012. Financial Management. 6 th
ed. Juta and
Company Ltd.
Hussain, M. M. and Gunasekaran, A. 2002. Non-financial management
accounting measures in
Finnish financial institutions. European Business Review. 14(3). pp.210-229.
Jonathan, B. 2010. Financial Management. Pearson Education India.
Shim, J. K. and Siegel, J. G. 2008. Financial Management. 3 ed. Barron's
Educational Series.
rd
Squire, M. M. and Snyman, R. 2004. Knowledge management in three financial
organisations: a
case study. Aslib Proceedings. 56(4). pp.234–242.
Tektas, A. Gunay, E. N. O. and Gunay, G. 2005. Asset and liability management
in financial
crisis. The Journal of Risk Finance. 6(2). pp.135-149.
Webster, L. A. H. and et. al. 2007. Financial Management. Medical Group
Management Assn.
-THE END-
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