Scope of financial management






Scope of financial management
The scope of financial management refers to the range of activities and responsibilities that fall under the purview of financial managers in an organization. This includes planning, organizing, directing, and controlling the financial activities of a company in order to maximize shareholder wealth. Financial management encompasses various functions such as financial planning, budgeting, investment decisions, risk management, and financial reporting. It also involves assessing the financial performance of a company through the analysis of financial statements, ratios, and other financial indicators. For example, a financial manager may be responsible for creating a budget for the upcoming fiscal year, determining the optimal capital structure for the company, or evaluating potential investment opportunities to increase profitability. They may also be involved in managing cash flow, minimizing financial risk, and ensuring compliance with regulatory requirements. According to a study by the Association for Financial Professionals, 61% of financial professionals cited managing liquidity and working capital as their top priority in 2020. This highlights the importance of financial management in maintaining the financial health and stability of an organization. An analogy to understand the scope of financial management is that of a captain steering a ship. The financial manager is like the captain who navigates the company through turbulent waters, making strategic decisions to ensure the financial success and sustainability of the organization. One verifiable fact related to the scope of financial management is that financial managers play a crucial role in the decision-making process of a company, as their expertise and insights help guide the organization towards achieving its financial goals and objectives.