Financial management is an activity arranging, budgeting, audit, administration, control, search and storage space of funds owned by an organization or company. management Activities
Financial management related to the three activities, namely:
Activities use of funds, the activity to invest in various assets.
Activities proceeds, namely activities to obtain financial resources, both from internal funding sources and also external funding sources.
Asset management activities, namely after the funds obtained and allocated in the form of assets, the fund should be managed as effectively as possible.
A finance manager in a company must know how to manage all the elements and in monetary terms, this must be done because finance is one of the important functions in achieving the objectives of the company.
Elements of financial management should be known by a manager. Let’s say that a financial manager did not know what-what are the elements of financial management, it would appear difficult to run a company.
Therefore, the financial manager should be able to find out all the activities of financial administration, especially analyzing the source and use of its funds to realize the maximum benefit for the company. A financial manager must understand the circulation of money in circulation, both external and internal.
Financial Management Function
Here is a brief explanation of the function of Financial Administration:
Financial planning, salary and expenditure to make plans as well as other activities for a certain period.
Financial budgeting, follow-up of monetary planning by making details of expenditures and revenues.
Financial Management, used organization funds to maximize the funds available by various means.
Finance search, discover and exploit the assets available for the operational activities of the company.
Financial storage, raising the company and also storing and securing these funds.
Financial control, evaluation and improvement of finances and financial systems in the enterprise.
Audit, internal audit on the existing corporate finance to avoid deviations.
Financial reporting, providing information about the financial condition of the company and also an evaluation
When associated with this objective, the monetary manager functions include the following:
Supervision over costs
Setting a price policy
Predicting the future earnings
Measuring or explore the cost of working capital
Objectives of Financial Management
Objectives of Financial Administration is to maximize the value of the company. Thus, if one day the company is sold, then the price can be set as large as possible. A manager should also be able to reduce the flow of money in circulation in order to avoid unwanted actions.
Analysis of Funding Sources and Uses
Analysis of the source of funds or fund analysis is essential for the financial manager. This analysis is useful to know how funds are used and the origin of the acquisition of those funds. A report that describes the origin of the source of funds and use of funds. The analysis device that can be used to determine the condition and financial overall performance of the company is the evaluation of the ratio and proportion.
The first step in the evaluation of the source and use of funds is a report of the adjustments prepared on the basis of two balance sheets for two times. The statement describes the change of each of these elements that reflect their resource or use of funds.
In general, monetary ratios are calculated can be grouped into six types:
Liquidity ratio, this ratio to measure a company’s ability to meet its short-term financial obligations.
Leverage ratio, this ratio is used to measure how much of the funds that are supplied by the owner of the company in proportion to the funds obtained from the company’s creditors.
Activity Ratio, this ratio is used to measure the effectiveness of administration in the use of its resources. All the activity ratio entails a comparison between the level of sales and investments in various kinds of treasure.
Profitability ratio, this ratio is used to measure the effectiveness of administration as noticed from the income generated on sales and investment companies.
Development ratio, this ratio is used to measure how well the company maintain its economic position of financial and industrial growth.
Valuation Ratios This ratio is usually a measure of the company’s achievements of the most complete because of these ratios reflect the mixed effects of the risk ratio with the ratio of the return.
Definition of Capital
The term “capital” is usually interpreted to mean many things, the terms of capital expenditures the company can be divided into two, namely: capital energetic and passive capital. Energetic capital is the wealth or the use of funds, while passive capital is usually a source of funds.
Financial manager is someone who has the right to take a decision that is very important in the field of investment and financing organization. The financial manager is also responsible for the monetary sector in a organization.
Understanding Functions and Objectives of Financial Management. Description of Financial Management
Financial management is usually any activity or activities of the company related to how to obtain working capital financing, make use of or allocate, and manage property to achieve the main objectives of the company.
Objectives of Financial Management
The main objective of Financial Administration is to maximize the value of the company or provide added value to the property owned by shareholders.
Scope of Financial Management
Scope of Financial Administration consists of:
Funding decision, including administration policies in the search company’s funds, such as policies issued numerous bonds and debt plan short and lengthy term organization sourced from internal and external.
Investment Decision, Policy venture capital investment to fixed property or Fixed Assets such as buildings, land and gear or machinery, and also financial assets in the form of securities such as stocks and bonds or activity to invest in various assets.
Decisions Asset Management, property management policy efficiently to achieve its goals.
Financial Management Function
The main function of Financial Administration are as follows:
Planning or Financial Arranging, Cash Flow Planning covers and Salary.
Budgeting or spending budget, reception planning and spending budget allocation effectively and maximize cost-owned funds.
Controlling or Financial Control, evaluation and improvement of finances and financial systems.
Auditing or Audit, internal audit for the monetary companies to comply with existing rules and accounting standards to prevent deviation.
Reporting or Financial Reporting, provide information reviews about the company’s financial condition and ratio evaluation of financial statements.
Financial Ratio Analysis
The analysis tool that is often used to determine the condition and financial overall performance of the company. Benchmark typically by comparing the increase or decrease in achievement between the two statements of financial position at two specific time period.
Financial Ratio Analysis generally used are grouped as follows:
Liquidity Ratio, the ratio for assessing the company’s ability to meet all financial obligations in the short term. Reports in the form of analysis and Working Capital Current Ratio to Total Property (WCTAR).
Leverage Ratio, the ratio to assess the extent of the funds provided by the shareholders or owner as compared with funds acquired from loans from the creditors. Reports in the form of Total Debt to Property (DAR), Total Personal debt to Equity (DER).
Activity Ratio, this ratio is used to measure the effectiveness of administration in the use of its resources. All the activity ratio entails a comparison between the level of sales and investments in various types of assets. Evaluation report in the form of Total Asset Turn Over (ATO), Working Capital Turn Over (WCTO), Total Equity to Total Property (EA).
Rentability Ratio, this ratio is used to assess the effectiveness of administration as noticed from the income generated on sales and investment businesses. The report analyzes the form of Return on Equity (ROE), Return on Property (ROA), Earning Electric power of to Total Expense (EPTI), Gross Profit Margin (GPM), and Operating Salary (OI).