Financial Management Report: Stakeholders, Policies and Economic Goals

This report delves into the core principles of financial management, focusing on the crucial role of management in meeting stakeholder objectives. It explores wealth maximization and business sustainability as key goals, alongside the significance of agency theory in aligning the interests of managers and shareholders. The report examines macroeconomic policies, including fiscal, monetary, interest rate, and exchange rate policies, and their impact on achieving economic growth and stability. It provides a detailed analysis of how these policies influence business decisions and contribute to overall financial performance. Furthermore, it highlights the limitations of agency theory, addressing potential drawbacks in its application. This report offers valuable insights into the complexities of financial management and its practical implications for businesses.

Financial Management

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK1.............................................................................................................................................1
1 Role of management in Meeting stakeholders objective.........................................................1
2. Defining different macroeconomic policies. ..........................................................................2
CONCLUSION ...............................................................................................................................3
REFERENCES ...............................................................................................................................4

INTRODUCTION
Financial management is refer to the process of organising, directing, controlling and
planning about the activities that are related to finance in an organisation (financial management,
2012). In general, these activities are helpful in proper utilization of funds and is also related to
raising of fund, capital budgeting, distribution of profit, financial control within company.
In this project report, the importance of management in stakeholders meeting is discussed
and agency theory that help in attaining of business goal. The report also show the the role of
fiscal, monetary, interest rate exchange rate policies for achievement of goal.
TASK1
1 Role of management in Meeting stakeholders objective.
Stakeholders meeting is the best way to them informed about the important topic related
to the business. It is necessary to involve stakeholder in decision making process through regular
meeting that help them to know about the financial position of company. So, to carry these
effective meeting proper financial management is required so that objective can be achieved.
There are different goal that have to be attain thus, required proper understanding that are
described below:
 Wealth Maximisation: It is defined as, modern technique of financial management, that
help in maximisation of profit which is used to be the main objective for any business
firm. This also create a advantage for shareholders as more profit more dividend. So
manager try to increase amount of divided that make them satisfy.
 Sustainability of business: It is related to the survival of company for long time by
making best financial decision to achieve the long term financial sustainability. So
stakeholder are more attracted toward a company that has sustainability in their business
operation. In any wrong decision is taken it may affect the functioning of business.
Importance of Agency Theory: This theory is related to series of agreement that suggest
the organisation could be viewed among different resources holder. It is a bounding that arises
when an individual or more member have to perform service function and designate decision
responsibilities to the different parties (Higgins, 2012). The premier agency has relation in
business that are affiliated with stockholders and managers. This has sure deduction which is
associated with corporate governance and business ethics. There are various ways through
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stakeholders can heighten their wealth. It is the right way, management play a more dominant
role to carry out these functions such as:
 It display the relationship between the agents and principles that aids in solving problem
through which goals can be achieved.
 This theory assist to attain financial objective like acquiring market share etc.
Proper management helps to make effective planning that is related to formation of new
policies and processes which is beneficial to increase the share price that result in more profit to
shareholders (Brigham and Houston, 2012). So agency theory have impact on manager to make
significant decision related to stakeholder such as distribution of dividend, financing of fund etc.
that are described below:
 They create effective policies through which fund can be raised and extra cost could be
controlled.
 This theory has a influenced in investment decision that help to build relationship before
investing in any venture that affect the profit and earning are utilised for investments.
 Price allotment is also one of the main decision that is taken by considering agent
relationship.
There are some limitations of agency theory:
 This theory deals with agents and manager that is major drawback as agents are the
external parties and there is a possibility of fraud within company.
 Agents charges a huge amount of commission through which profitability of company
can be affected.
 Another disadvantage is that agent represent distributors and end user that will affect the
behaviours of agents and there is a chance of threat to company growth.
2. Defining different macroeconomic policies.
Macroeconomic policies is related to the transaction that deals with performance,
structure, behaviour and decision making of an organisation. This help in economic growth,
maintaining workforce and distribution of payment etc. in company. So to fulfil all these
objective there are other related policies and their role in achievement of macroeconomic policy
that are discussed below:
Fiscal Policy: It is related to the management of government in an economy that help
business firm to modify their spending level and tax rate to monitor nation's economy. This
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policy plays a significant role in maintaining positive growth in economy that are beneficial for
Business firm.
Role: Fiscal policy supply an summary about the level of spending and ascertains volume
of expenditure over earnings. This policy helps in achieving macro economic target of growth as
this policy plays an important role in ascertaining what amount should be spend and what should
be reserved in ultimately results in economic growth.
Interest rate: It is related to the price that is levied on customer to borrow debts that is
related to cost money. This is the actual price rate at which the borrower pay to lenders in order
to recover its money.
Exchange rate policy: This policy is related to the aspect of nation currency in term of
another nation currency. Exchange rate is a process that provide accurate rate by which import
and export within a country take place.
Role: Interest rate policy and exchange rate aid an economy to maintain rate that are
related to export, import, loans and other borrowing instruments. This help to maintain proper
liquidity in economy of nation that help them in overcome the situation of inflation, maintained
reserve can be used (Molina and Preve, 2012).
Monetary policy: This policy is related to the aspect that are regulated by central bank
or other currency head that are responsible to maintain proper flow of money in economy. The
main aim of these boards to target an inflation rate or interest rate so that price can be stable.
Role: Monetary Policy gives a brief set of instruction to central bank about its rate and
reserves. These policy are helpful in fulfilling the macro economic goals to maintain balance of
payment so that nation can achieve development and profitability.
CONCLUSION
Form the above report is has been concluded that financial management is an important
part for any company that help in making important decision. The report focus on importance of
management in delivering benefits to shareholders meeting and achieving macroeconomic
targets through various policies.
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REFERENCES
Books and Journals:
Brigham, E. F. & Houston, J. F. (2012). Fundamentals of financial management. Cengage
Learning.
Higgins, R. C. (2012). Analysis for financial management. McGraw-Hill/Irwin.
Molina, C. A. & Preve, L. A., (2012). An empirical analysis of the effect of financial distress on
trade credit. Financial Management. 41(1). pp.187-205.
Online
Financial management. 2012.[Online]. Available through:
<https://wikifinancepedia.com/finance/financial-management/what-is-financial-
management-definition-examples-and-its-importance>
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