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Author : eliezerparisian
Pages 16 (4016 words)
Financial management is that managerial activity which is concerned with the planning and controlling of the firm's financial resources. Though it was a branch of economics till 1890, as a separate activity or discipline it is of recent origin. Still it has no unique body of knowledge of its own, and draws heavily on economics for its theoretical concepts even today.
Practicing managers are interested in this subject because among the most crucial decisions of the firm are those which relate to finance, and an understanding of the theory of financial management provides them with conceptual and analytical insights to make those decisions skillfully1.
Financial management, as an academic discipline, is concerned with decision-making in regard to the size and composition of assets and the level and structure of financing. To make wise decisions a clear understanding of the objectives, which are sought to be achieved, is necessary. The objective provides a framework for optimum financial, decision-making. In other words, they are concerned with designed a method of operating the internal investment and financing of a firm. These all are done in a systematic way if financial management is studied 2.
Financial management is related to profit maximization as a decision criterion. According to profit maximization goal, actions that increase profits should be undertaken and those that decrease profits are to be avoided. In specific operational terms, as applicable financial management, the profit maximization criterion implies that the investment, financing and other decisions of the problem should be oriented to the maximization of profits.
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