Financial Solutions and Insurance Policies

Financial management has undergone fundamental changes as regards its scope and coverage. Financial management is the application of planning and control to the finance function. It helps in profit planning, measuring costs, and accounts receivables. It also helps in monitoring the effective deployment of funds in fixed assets and in working capital. It aims at ensuring that adequate cash s on hand to meet the required current and capital expenditure. If facilitates ensuring that significant capital is procured at the minimum cost to maintain adequate cash on hand to meet any exigencies that may arise in the course of business. Financial management helps in ascertaining and managing not only current requirements but also future needs of an organization. It ensures that funds are available at the right time and procurement of funds does not interfere with the right of management and exercising control over the affairs of the company.

Assessing the financial requirements objective of finance function is to assess the financial needs of an organization and then finding out suitable sources for raising them. The sources should be commensurate with the needs of the business. If funds are needed for longer periods then long-term sources like share capital, debentures, term loans may be explored. Proper utilization of funds though rising of funds is important but their effective utilization is more important. The funds should be used in such a way that maximum benefit is derived from them. The returns from their use should be more than their cost. It should be ensured that funds do not remain idle at any point of time. The funds committed to various operations should be effectively utilized. Those projects should be preferred which are beneficial to the business.

The capital structure refers to the kind and proportion of different securities for raising funds. After deciding about the quantum of funds required it should be decided which type of securities should be raised. It may be wise to finance fixed assets through long term debts. Even if gestation period is longer, then share capital may be most suitable for Long term debts. Even here if gestation period is longer, then share capital may be most suitable. Long term funds should be employed to finance working capital also, if not wholly then partially. Various sources from which finance may be raised, the share capital, debentures, financial institutions, commercial banks, public deposits should be monitored. If finance is needed for short periods then banks, public deposits and financial institutions may be appropriate on the other hand; if long term finance is required then share capital and debentures may be useful. If management does not want to dilute ownership then debentures should be issued in preference to share.

Financial management is an area of financial decision making, harmonizing individual motives and enterprise goals. Financial management is concerned with the managerial decisions that result in the acquisition and financing of long-term and short-term credits for the firm. As such it deals with the situations that require selection of specific assets and combination of asserts, the selection of specific liability / combination of liabilities as well as the problem of size and inflows and outflows of funds and their effects upon managerial objectives. It influences the profitability / return on investment of a firm. It influences cost of capital. Efficient fund managers endeavor to locate fewer sources so as to enhance profitability of organization. It affects the liquidity position of firms. It enhances market value of the firm through efficient and effective financial management. Financial management is very much required for the survival, growth expansion and diversification of business.

Increasing profitability planning and control of finance function aims at increasing profitability of the concern. It is true that money generates money. To increase profitability, sufficient funds will have to be invested. Finance function should be so planned that the concern neither suffers from inadequacy of funds nor wastes more funds than required. A proper control should also be exercised so that scarce resources are not frittered away on uneconomical operations. The cost of acquiring funds also influences profitability of the business. Maximizing value of firm is aims at maximizing the value of the firm. It is generally said that a concern’s value is linked with its profitability. The funds should be used in such a way that maximum benefit is derived form them. First approach just emphasizes only on the liquidity and financing of the enterprise.

Many activities associated with finance such as saving, payment of things, giving or getting credit; do not necessarily require the use of money. In the first place, the conduct of international trade has been facilitated. The development of the pecuniary unit in the various commercial nations has given rise to an international denominator of values. The pecuniary unit makes possible a fairly accurate directing of capital to those parts of the world where it will be most productive. Finance refers to the financial system in a rudimentary or traditional economy, that is, an economy in which the per capital output is low and declining over a period of time. The financial organization in rudimentary finance is characterized by the absence of any financial instruments of the saving deficit units of their own which they can issue and attract savings. Financial system is that there are no markets where firms can compete for private savings.

Organization of finance function differs from company to company depending on their respective requirements. In many organizations one can note different layers among the finance executives such as Assistant Manager, Deputy Manager, and General Manager. The designations given to the executives are different. They are Chief finance officer, Vice-president, Financial controller, General Manager, Finance officers. The Board of Directors, who is at the helm affairs, normally constitutes a finance committee to review and formulate financial policies. Two more officers, namely treasurer and controller may be appointed under the direct supervision of CFO to assist him or her. The Board of Directors is the supreme body under whose supervision and control Managing Director, Production Director, Personnel Director, Financial Director, Marketing Director perform their respective duties and functions.