No business activity can be undertaken without finance. Finance is the lifeblood of business. A business cannot even be started without finance. Every kind of business organization, whether it is small, medium or big, it needs finance. Every business activity is an economic activity and these activities require finance. There arises the need for arranging and managing finance in the businesses.
Meaning and Definition of Financial Management
Financial management is concerned with the acquisition of funds and their optimum utilization. It is all about acquiring funds at minimum cost and generate optimum return through its optimum utilization. Funds are acquired to meet financial aspects of business activity.
According to J.S. Massie:
“Financial management is the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations.”
According to Howard and Upton:
“Financial management is the application of planning and controlling functions of finance function.”
According to the Guthman and Dougal:
“Business finance can be broadly defined as the activity concerned with planning, raising, controlling, administering of the funds used in the business.”
Nature of Financial Management
- It is an indispensable organ of management. It is an integral part of business decision-making
- It is a continuous process.
- It is the centralized nature of finance function i.e. investment, financing and dividend decision.
- Helpful in the decision making of top management.
- It helps in measurement of performance.
- It is pervasive. All form of business organization, big or small needs to manage finance.
- It has a wide scope