Financial Management Assignment - (Solved)

Added on - 22 Nov 2020

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Financial Management
Table of ContentsINTRODUCTION...........................................................................................................................1Assessment.......................................................................................................................................11. Critically assess the purpose of financial management and the application of three majorfinancial decisions. Also, the factors of each decision that affects the shareholder's financialposition........................................................................................................................................1CONCLUSION................................................................................................................................4REFERENCES................................................................................................................................5
INTRODUCTIONFinancial management is a systematic process of planning and controlling the finance of thecompany. It is done to achieve the objectives of the company. It is concerned with the allocationof resources, effective utilization of resources and generating large profits towards attaining thegoals effectively and efficiently. The present study describes the purpose of financialmanagement and the different decisions like financing, investment and dividend decisions madeas per the perspective of the shareholders. Furthermore, it also explains about the factors withinthe decisions that impact the shareholder's financial position.Assessment1. Critically assess the purpose of financial management and the application of three majorfinancial decisions. Also, the factors of each decision that affects the shareholder'sfinancial position.a. Explaining the purpose of financial management.Wealth maximization-The foremost purpose of financial management is to maximize thewealth of the shareholders. It means increasing the value of the shares held by theshareholders by optimum utilization of capital so that higher profits can be generated(Karadag, 2015). Wealth maximization is superior to profit maximization as the formeraims in the growing success of the organization in future while the latter reflects the shortterm benefit that is gained by the enterprise.Ensuring funds availability- For smooth functioning of the firm, timely availability offunds is an important aspect and objective of financial management in the business. Tosurvive with a sound financial position, funds must be managed efficiently so thatmanagement does not face scarcity of resources.Optimal capital structure- A perfect balance between the equity share and debenturesenable the enterprise in achieving the optimal capital so that wastage of resources, timeand money can be avoided. The balance will be maintain by not issuing too much ofshares and enhancing control over the capital cost.Ensuring security of funds- The essential purpose of financial management, to ensurethe safety of funds by creating the reserves. Minimum possible risk should be attached tothe investments made (Rossi, and et.al., 2019). Reserves such as general reserve, capitalreserve and sinking funds are created for fulfilling this purpose.1
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