Financial Management: Importance, Role, and Sources of Finance

Financial Management

TABLE OF CONTENTS
Importance of finance function..............................................................................................3
Role of financial management...............................................................................................3
Sources of finance..................................................................................................................3
REFERENCES...........................................................................................................................4

INTRODUCTION
Financial management is concerned with the effective procurement and utilization of
funds so that organizational goals can be met. It lays high level of emphasis on managing
cash flows and working capital with the motive to get desired level of outcome or success.
Under financial management, focus is laid on taking three types of decision regarding
investment, financing and dividend. In this, report will develop understanding about the
concept of financial management and its significance within organizational context. It also
depicts funding sources that business unit can employ for fulfilling monetary requirements.
Importance of finance function
In business unit, finance function mainly includes decision taking under the
areas of financial, investment, dividend and liquidity. In investment decision, manager
focuses on allocating capital into long term assets wisely for ensuring efficient operations
(Brigham and Houston, 2021). Further, manager’s function is to assess the viability of new
investment opportunity in terms of profitability. In addition to this, finance manager’s
function is to develop strategy about fund acquisition. In addition to this, optimal capital
structure need to be formulated that maximizes shareholder’s wealth (Bhimani, 2022). In
order to maintain the faith of investors in firm’s operations business unit provides them with
suitable returns. Thus, manager sets optimal dividend policy that maximizes firm’s value and
maintain shareholder’s interest as well. Manager is also responsible for maintaining enough
current assets in line with the obligation assessed. In other words, effective working capital
management is the foremost function. Moreover, without having enough working capital
business unit would not become able to perform daily operations effectually. By taking into
account all these aspects, it can be stated that finance functions are highly vital for the growth
and success of the firm.
Role of financial management and manager
From several perspective, financial management helps firm in getting the desired level
of outcome or success. Through the means of financial management company can avoid
aspects related to the overestimation of profit, cost, sales etc. It facilitates appropriate
estimation and thereby helps in setting suitable budget for (Bulturbayevich and et.al., 2020).
By applying the concepts of financial management such as variance analyse firm can assess
deviations that take place in business performance. Hence, considering the causes of