Financial Management Essay

This essay discusses the importance of financial management in business, highlighting its purpose of maximizing company wealth and ensuring the availability of funds. It then delves into the three key decisions from a shareholder's perspective: investment, financing, and dividend decisions, explaining how each decision impacts the shareholder's return on investment.

Financial Management

Table of Contents
INTRODUCTION...........................................................................................................................1
Purpose of financial management....................................................................................................1
Three main decision from a shareholder's perspective....................................................................2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
In business world, money is consider to be the main wheel of which different business
operation depends and run smoothly. Financial management is related to the process of making
plans, organising money, controlling and monitoring all financial resources within an
organisation with a common view to attain the desired goals and maximise profit in a financial
year (Atrill, 2017).
Purpose of financial management.
In case of business scenario, the filed of finance that is related to the management and
investment in debt, equity and ratio is known as financial management. According to Guthman
and Dougal the actual meaning of financial management is operation concerned with planning,
controlling and administering of funds that can be utilised in business. Therefore, it is stated that
proper financial management would support a business firm to supply best goods to their
customer at the lowest price. The main purpose of this management is to maximise the overall
wealth of company during a time frame, proper ensure the availability of funds and resources and
make effective use of these funds in subject to upgrade functioning of business activity. It also
focuses to achieve the optimum capital structure that is making available of debenture and shares
and also ensuring the safety of funds and making of reserve in order to meet any types of future
contingencies. Nowadays the concept and focus of financial management have been moved from
financing decision making to assets management as these are also valuable part for any business
(DRURY, 2013).
In addition, the concept also relates with proper management of cash flows and in order
to take rational capital budgeting, dividend and investment judgement in nearby future. So,
financial management is generally possessed acquisition of money, allocation and control of
financial resources of an organisation. Some of the main purpose are:
 To make sure of continuous and appropriate supply of resources within a firm.
 To ensure that there are adequate return to the respective shareholder that is completely
depended upon market price of share, expectation of shareholder.
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 To maintain authenticity and safety on investment such as to make sure that funds are
mainly invested into safe activities that will deliver sufficient rate of return could be
maintained.
 To build a plan for sound capital structure that is to make sure there must be fair and
sound composition of capital invested in business and also build balance between debt
and equity.
Three main decision from a shareholder's perspective.
In present time, if it is carefully reviewed what a business exactly requires is that money
and decision. Financial management help to manage the resources and make their best use to
maximise the result. Similarly, from shareholder perceptive it is equally significant for them to
properly calculate all factors before making any decision (Soin, Ramirez and Khubchandani,
2013). Shareholders are the individual, corporate bodies etc. those owns a particular portion of
business stocks with a desire to get a sufficient return. Thus these judgement are like wise to
those made by any organisation that includes investment, financial and dividend decision. These
are discussed below:
Investment decision: These decision involves identification of financial chances and
possibilities that will be helpful in providing maximum return on specific investment. So
different shareholder view various companies as their opportunity option as they seek to get
enough amount of return in future. In order to ascertain these chances they analyse specific
criteria such as company profitability, last year financial statements other shareholder perception
related to particular company. Thus if stockholder is able to determine these opportunities by
considering all the essential obligation then they make decision to invest in different project for
long or short term as per their requirement and nature of business. In case if there are any
modification in these conditions shareholder look for the other option and retain their investment
decision that will deliver them better outcome in approaching time.
Financing decision: These decision includes either shareholders are able to cope up with
its financial obligations by investing in different types of business. Thus It is very crucial for
respective shareholder to make sure that investment must bring better result in future for therm to
meet financial requirement. They wants sound result from investment that will support them to
get enough money and pay back their debts. So their are necessary causes connected with these
types of judgement which impact the current and actual shareholder's position that is related to
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number of total shares hold by them in an organisation. Therefore, there are various factor that
affect the financial decision such as cost of raising funds from different sources, larger risk that
are related with funds from there are borrowed, actual position of cash flows within company so
that profitability could be maintained.
Dividend Decision: These kind of decision are linked with proper allocation of profit
that is received by companies during a specific time period. The chief option are whether to hold
the earning net income or to dispense to respective shareholder. It is observed tat shareholder
only invest in those activities that will deliver more result and profitability to a company. There
are various factors that can affect the dividend decision of shareholder that are total earning in
present and future, balancing dividend as companies tries to balance dividend per share so that
income of company could be raised in approaching time. Hence more effective distribution of
dividend will make shareholder to invest in specific business and attain the valuable outcome and
maintain stable financial position (Eisdorfer, Goyal and Zhdanov, 2018).
CONCLUSION
It has been concluded that in order to formulate and take decision that are attendant to
investment, dividend and financial companies are liable to see the interest of shareholder. As
various stockholder of a firm either investor or government to consider these decision while
developing different plan of action related to all above decision.
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REFERENCES
Books and Journal
Atrill, P. (2017). Accounting and finance: an introduction. New York: Pearson.
DRURY, C. M. (2013). Management and cost accounting. Springer.
Soin, K., Ramirez, A., & Khubchandani, J. (2013). The use of international service learning
initiatives for global health education: case studies from Rwanda and Mexico. Health
promotion practice. 14(3). 334-342.
Eisdorfer, A., Goyal, A., & Zhdanov, A. (2018). Distress anomaly and shareholder risk:
International evidence. Financial Management. 47(3). 553-581.
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