Assignment | Financial Management System

Added on - 22 Nov 2020

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FINANCIALMANAGEMENT
Table of ContentsINTRODUCTION...........................................................................................................................1PURPOSE OF FINANCIAL MANAGEMENT AND DECISIONS..............................................1CONCLUSION................................................................................................................................2REFERENCES................................................................................................................................4
INTRODUCTIONFinance is a lifeline of a business. Without it a business cannot undertake any kind ofeconomic activity. This report critically evaluates the purpose of financial management and theimplications of the three main decisions from a shareholder's point of view. Additionally, criticalfactors have been identified that affect the financial position of the shareholdersPURPOSE OF FINANCIAL MANAGEMENT AND DECISIONSFinancial Management refers to that field of finance which is concerned with the equity,debts and ratios. In addition to this, financial management also concerns itself with generation ofcash-flows in order to take rational capital budgeting and investment decisions(Andreou, Louca& Panayides, 2014). In the current business scenario, the focus and perspective of financialmanagement has shifted from that of a financing option to that of asset management as well asfunnelling of financial resources through proper allocation and apportionment. This has led to awider applicability of the concept so as to maximize economic welfare for individuals,stakeholders as well as corporations. This acceptance, hence, proves that the financialmanagement is the lifeblood of organisations that can lead to rise and fall in a given businessenvironment.It is noteworthy for evaluation purposes to understand that financial management, nomatter how important, must not be relied upon completely. The main reason to make such anassertion is that no organisation can be fully reliant on a single factor. It is a combination ofdifferent factors such as competition, industry trends, capacity of the business, customerperspective regarding the organisation and many more which affect how a business takesstrategic decisions in order to achieve its goals or objectives. Due to this, an organisation must becautious, adaptable as well as rational to survive in current business scenario.Conversely, from shareholders' perspective, the same rule applies. They need to berational as well as calculative before making a decision(McKinney, 2015). These decisions aresimilar to those made by a business entity and include investment decisions, financing decisionsand dividend decisions. A shareholder is one who owns a certain portion of an entity's stock.They may be an individual, corporation or a judicial body. For these, an investment decision isone which includes determination of financial opportunities that provide them with maximumprofits or return. Similar to a corporation, a shareholder views a company as an investment1
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