...FINANCIAL MANAGEMENT GOALS FIN/200 July 12, 2013 FINANCIAL MANAGEMENT GOALS Financial management is an integrated decision-making process concerned with acquiring, financing, and managing assets to accomplish some overall goal within a business entity. Finance is one of the key functions within any organization. Financial management involves three major types of decisions: long-term investment decisions, long-term financing decisions, and working capital management decisions, which are short-term in nature. These decisions concern the acquisition and allocation of resources among the various activities of a firm. Investment decisions typically affect financing decisions and vice versa. Although all these decisions are important, decisions are typically the most important because they affect a firm’s growth and profitability. There are two approaches that shape and influence the way managers prioritize and do things - the classical view and the socioeconomic view. The classical view "says that management's only social responsibility is to maximize profits", that "there is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." Friedman (1962, 1970) argued that managers' main responsibility is to operate the organization in the interest of the shareholders,...
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...Financial Management Goals Financial Management Goals Financial management is the process used by businesses to plan, direct and monitor the monetary resources of an organization. Knowing the financial status of a company enables management to determine uncertainties and make the necessary changes to reduce any risks. The main goal of financial planning is to maximize profit and wealth. To do so a company must effectively control and supervise the firm’s earnings. Hence, cash in versus cash out. If more money is being spent than earned, a company can be heading down a road of destruction. Earnings should be watched closely to ensure no overspending and that a profit is made. Increasing cash flow and profit leads to wealth management; most believe that profit equates wealth. The truth is, profit is short term, while wealth is continuous and wealth is the bottom line of financial goals. Financial management involves three major types of decisions: long-term investment decisions, long-term financing decisions, and working capital management decisions, which are short-term in nature. Financial decision making holds a major bearing on wealth management. An erroneous decision can destroy a company, its investors and stockholders. When embarking onto new financial territories, a manager must take the following into consideration… * Present and projected income earnings * What risks are involved * Working capital Wise decision making will formulate a conducive environment...
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...Lesson # 1 Financial Management: Introductory Notes and Words Concepts of Finance and Financial Management Financial Management refers to the proper management of finance functions of an enterprise or organization. In other words, financial management is concerned with the financial decision-making and other financial aspects. Thus, financial management involves financial planning, financial organization, financial coordination and control, financial reporting, financial mergers, combinations and acquisitions, insurance and tax management etc. Financial planning is concerned with the act of deciding in advance the financial activities that are essential if the enterprises are to achieve their financial goals and objectives. These financial activities mainly consist of properly estimating financial needs; selecting the proper sources of finances; procuring the requisite funds; proper utilization of the funds and custody and safekeeping of funds. Financial organization is the grouping of the finance functions into various divisions, departments, sections and sub-sections of the enterprises for their proper and efficient performance. That is, financial organization deals with the proper allocation of the finance functions amongst the various financial executives. Financial coordination and control deal with the proper adjustment of the finance function and evaluation of the same in relation to the predetermined standards. Financial reporting is the proper collection and...
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...something which a person or organization set out to achieve. Manager:The person who is responsible for supervising the organizations resources to meet the set goals. 1.Control costs and/or generate revenue 2. Develop or approve plans and processes 3. Assign and monitor tasks 4. Reorganize and hire or fire people as needed 5. Help new people get started and understand the objectives 6. Make sure deadlines are meet 7. Resolve conflicts and staff issues 8. Guide, motivate and recognize the team 9. Support the team and fight for them 10. Escalate issues or concerns to upper management 11. Help the staff develop their job skills and career 12. Inform the staff of decisions made at higher levels Employee Motivation One of your goals as a manager is to achieve high morale among the ranks. Employee motivation should be at the top of the list when it comes to the goals for your company if you want to achieve success. As author Stephen Covey wrote in his book "The Seven Habits of Highly Effective People": "There are organizations that talk a lot about the customer and then completely neglect the people that deal with the customer--the employees." It's important to set goals both for your employees to achieve and for you to accomplish as the owner to ensure a happy workplace. For instance, one of your goals could be to establish a successful employee recognition program or to increase employee productivity (which is related to motivation) by 20 percent over the next...
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...CHAPTER 1 INTRODUCTION TO FINANCIAL MANAGEMENT Answers to Concepts Review and Critical Thinking Questions Q1.1 The Financial Management Decision Process. What are the three types of financial management decisions? For each type of decision, give an example of a business transaction that would be relevant. Capital budgeting (deciding on whether to expand a manufacturing plant), capital structure (deciding whether to issue new equity and use the proceeds to retire outstanding debt), and working capital management (modifying the firm’s credit collection policy with its customers). Q1.5 Goal of Financial Management. What goal should always motivate the actions of the firm's financial manager? To maximize the current market value (share price) of the equity of the firm (whether it’s publicly traded or not). Q1.6 Agency Problems. Who owns a corporation? Describe the process whereby the owners control the firm's management. What is the main reason that an agency relationship exists in the corporate form of organization? In this context, what kinds of problems can arise? In the corporate form of ownership, the shareholders are the owners of the firm. The shareholders elect the directors of the corporation, who in turn appoint the firm’s management. This separation of ownership from control in the corporate form of organization is what causes agency problems to exist. Management may act in its own or someone else’s best interests, rather than those of the shareholders. If such...
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...loss for the organization. Healthcare organizations prepare projected operating budgets for the approval of senior management. At the end of the fiscal year, a detailed accounting provides the report for how the company performed. There are effective and ineffective ways to manage the fiscal status of healthcare entities. This paper will take everything into consideration and identify effective and ineffective financial management practices in the health care setting. Healthcare businesses thrive on a foundation of strong fiscal management. There are effective management practices in the creation and monitor of an operational budget. An effective management practice is to link budget development to corporate strategy. When the budget is linked to the overall corporate strategy, managers and employees can get a clearer picture of the company's strategic goals. Capital management aligns an organization's long-range strategic, financial, and related operating plans (Nugent, 2001). Obtaining employee buy in leads to the coordination of support for organizational goals, leading to strong fiscal performance. Effective communication between departments ensures a same page mentality in budget development. Streamlining budget procedures reduces budget complexity. It allows management to collect budget information, make allocation decisions, and coordinates target goals sooner at a lower cost. Streamlining causes less disruption to the company's core activities (Nugent, 2001 ) Resource...
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...Financial Management for NPO I. Introduction “Ten years ago, management was still a dirty word for those involved in nonprofit organizations. Nonprofits prided themselves on being free of the taint of commercialism and above such sordid considerations as the bottom line… Today, nonprofit organizations have learned that they need management and leadership even more than business does…” (Montana and Petit, 2009) The years when “management” was a prohibited word in nonprofit organizations are long gone. Nowadays, nonprofit leaders are starting to realize what an essential role financial management plays in NPOs. Moreover, as the number of nonprofit organizations around the world keeps rising, more nonprofit leaders and managers have aimed to develop their skills in financial management. As a matter of fact, the nonprofit sector is one of the fastest-growing sectors around the world: just in the United States there are 1.5 million nonprofit organizations and growing, employing one in 10 American employees. In this paper, we will look at: 1) the financial management process, 2) the importance of financial management for nonprofit organizations, 3) financial management for nonprofits organizations. II. What is Financial Management? One of the most accepted definitions of financial management was given by Kuchal, stating that “Financial Management deals with procurement of funds and their effective utilization in the business” (as cited in Paramasivan & Subramanian...
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...UNIT-I Unit I: Nature of Financial Management: Meaning – Nature – Objectives – Scope- Functions of Financial Management – Financial forecasting – Financial Planning – Time Value of Money (NP) Nature of Financial Management: Meaning: Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise. Nature Scope/Elements 1. Investment decisions includes investment in fixed assets (called as capital budgeting).Investment in current assets are also a part of investment decisions called as working capital decisions. 2. Financial decisions - They relate to the raising of finance from various resources which will depend upon decision on type of source, period of financing, cost of financing and the returns thereby. 3. Dividend decision - The finance manager has to take decision with regards to the net profit distribution. Net profits are generally divided into two: a. Dividend for shareholders- Dividend and the rate of it has to be decided. b. Retained profits- Amount of retained profits has to be finalized which will depend upon expansion and diversification plans of the enterprise. Get MBA study materials, articles, order business templates and stock market updates from or http://www.easymbaguide.in/ or www.easymbaguide.jimdo.com or www.easymbaguide.blogspot.com. Give your valuable feedback...
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...limited to, personal goals, educational success, and financial stability. Personal goals, educational success, and financial stability will be discussed as the main points of personal responsibilities. As everyone is entitled to their own opinion, responsibilities is defined as being able to act independently and make decisions without having someone authorizing it in particular. Personal responsibility refers to responsibility in a sense that one is personally responsible for achieving long-term and short-term goals, educational success, and financial stability. In this instance, long-term goals are considered a responsibility. It would have to be achieved by the person aiming for that long-term goal. A long-term goal may roughly take anywhere from five to ten years, maybe even up to twenty or thirty. If someone long-term goal is intended to be reached between five, ten, twenty or thirty years, it simply becomes a responsibility to make sure that the specific long-term goal is met. A master’s degree can be looked as a long-term goal. In order to achieve that goal, the person responsible must ensure that degree plan is created and carry out the task outlined in that degree plan. In that degree plan may layout some short-term goals. Short-term goals lead to long-term goals. Short-term goals could be in the realm of personal responsibility as well. Unlike a long-term goal, a short-term goal is in the immediate future. In this case, an immediate goal would consist of anywhere...
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...voters a “say on pay” for U.S. Representatives.) Specifically, the measure allows shareholders to approve or disapprove a company’s executive compensation plan. Because the vote is nonbinding, it does not permit shareholders to veto a compensation package and does not place limits on executive pay. Some companies had actually already begun initiatives to allow shareholders a say on pay before Congress got involved. On May 5, 2008, Aflac, the insurance company with the well-known “spokesduck,” held the first shareholder vote on executive pay in the United States. Understanding how a corporation sets executive pay, and the role of shareholders in that process, takes us into issues involving the corporate form of organization, corporate goals, and corporate control, all of which we cover in this chapter. 1.1 What Is Corporate Finance? Suppose you decide to start a firm to make tennis balls. To do this you hire managers to buy raw materials, and you assemble a workforce that will produce and sell finished tennis balls. In the language of finance, you make an investment in assets such as inventory, machinery, land, and labor. The amount of cash you invest in assets must be matched by an equal amount of cash raised by financing. When you begin to sell tennis balls, your firm will generate cash. This is the basis of value creation. The purpose of the firm is to create value for...
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...seams of health care accounting and management. It is important that the principles and practices are adhered to in order for the organization to continue operating. Health care is an organization which thrives on care and safety along with stability. It is management’s responsibility to ensure that not only care criteria are met, but financial obligations also. It is important to remember that the health organization not only serves the client, but family also when care, finance, and ethics are at hand. The function of management is to report fairly and accurately on all financial statements and obligations. Management is the key competency when it comes to ensuring that the strength of the organization is strong and all reporting practices are legal. Management will be the obligator to report to not only other management members, but the CEO or Chief Financial officer also. Management has the ability to keep staff stable, knowing that jobs are secure to financial statements or operational costs are not an issue in the health care organization they are currently employed in. If management respect their practices and obligations to report all finances fairly and accurately the organization can continue operating successfully. Management is the leaders in consistent and accurate reporting of financial statement for with the cost of health rising consumers who are paying depend on competency from the health care organization. Management must plan, discuss and look at accurate...
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...Reporting and Ethical Practices HCS 405 June 24, 2014 Reporting and Ethical Practices Financial and accounting professionals must follow the ethical standards that regulate the type of business they conduct, who they conduct business with, and how they use their skills to conduct their business. These ethical standards are defined by professional finance organizations and the Financial Accounting Standards Board. This article will discuss reporting and ethical practices for any financial and accounting organization. It will include a summary of generally acceptable accounting principles and general financial ethical standards, as well as, summarize the four elements of financial management. This article will conclude by discussing researched articles on financial reporting practices, ethical standards, and financial management within the health care organization. Generally Accepted Accounting Principles (GAAP) and Financial Ethical Standards According to "Business News Daily" (2014), “Generally Accepted Accounting Principles (GAAP) is a combination of guidelines, comprehensive rules, and generally accepted standard practices utilized throughout the accounting industry to prepare and standardize financial statements, such as balance sheets, income statements, and cash flow statements” (Generally Accepted Accounting Principles (GAAP): Standards & Rules for Accountants). In 1999, the American Institute of Certified Public Accountants (AICPA) designated the...
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...finances of the company. The elements of financial management direct the health care organizations in terms of financial management. Knowledge of what is acceptable like accounting principles, general finances, and ethical standards will help the company run successfully. The ethical issues can be avoided with proper preparation. Finanacial managers play an important part in maintaining a successful organization. Includes a summary of the four elements of financial management The four elements of financial management are planning, controlling, organizing and directing, and decision-making. These four elements construct the way financing and reporting are ran. Financial manager make different choices for projects and keep the projects on track. These four elements build the foundation for financial reporting. The information the financial managers provide is essential to the reporting process. Planning The inital step of any financial project is planning. Financial managers are responsible for communicating the goals of the project. The company overall will set goals for the year or specific goals for an upcoming project. It is the financial managers responsibility to inform the organization of the plan of action to keep the organization on track. The steps that need to be taken to achieve theses goals are also set by the financial manager. Controlling Controlling is the second step in financial management. The financial manager has to make sure all areas of the...
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...money. At the micro level, finance is the study of financial planning, asset management and fund raising for business and financial institutions. At the macro level, finance is the study of financial institution and financial markets and how they operate within the financial systems in both the domestic and global economics. Scholar’s view: “Finance consists of providing and utilizing the money, capital rights, credit and funds of any kind which are employed in the operation of an enterprise.” _George R Terry “Finance is concerned with the process, institutionsmarkets and instruments involved in the transfer of money among and between individuals, business and governments”. _Lawrence J Gitman From the above discussion, it can be said that finance is the process of financial planning, identification of sources of fund raising, investment of fund, protection of fund, distribution of profit to achieve the goal of the organization. Question-2: What is business finance? Ans: Generally, finance which is concerned to meet all the financial needs of business enterprise is called business finance. Alternatively; business finance is the field of study with the help of which one can understand formulation of financial planning, organizing and controlling...
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...Chapter 1 The Financial Manager and the Firm Learning Objectives 1. Identify the key financial decisions facing the financial manager of any business firm. 2. Identify the basic forms of business organization used in the United States, and review their respective strengths and weaknesses. 3. Describe the typical organization of the financial function in a large corporation. 4. Explain why maximizing the current value of the firm’s stock price is the appropriate goal for management. 5. Discuss how agency conflicts affect the goal of maximizing stockholder wealth. 6. Explain why ethics is an appropriate topic in the study of corporate finance. I. Chapter Outline 1.1 The Role of the Financial Manager A. It’s All about Cash Flows • The financial manager is responsible for making decisions that are in the best interest of the firm’s owners. • A firm generates cash flows by selling the goods and services produced by its productive assets and human capital. After meeting its obligations, the firm can pay the remaining cash, called residual cash flows, to the owners as a cash dividend, or it can keep the money and reinvest the cash in the business. • A firm is unprofitable when it fails to generate sufficient cash flows to pay operating expenses, creditors, and taxes. Firms that are unprofitable over time will be forced into bankruptcy by their creditors. In bankruptcy, the company will be reorganized, or the company’s...
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