Finance is a management of money and financial activities are forecasting, saving, budgeting, lending, borrowing, and investing. Basic financial management is managing every day’s operation of the business and maintains the budget correctly. It also includes the maintenance of long-term equipment’s investment in the financing of the operations, budgeting, obtaining financing, and business finance. There are four elements in managing finance such as decision making, controlling, planning, organizing, and directing.
Planning is the guiding principle of finance and success is calculated by progression towards goals, making successful investments selection, managing risk, diversification, a product of good habits, and the foundation of a successful financial plan that is budget management. Finance helps us to keep track and make better decisions with your accounting and money as you are using money in your daily life such as budget making for your groceries.
Finance helps you to save, raise and manage money and firms need finance for their business start-up such advertising, new equipment’s and pay for premises that is firms need money to pay salary for suppliers and wages on time, they need money for expanding the business and they have to pay for their new branch in a different country or city.
Basic principles, sources and primary areas of finance
Finance is having six basic principles, they are hedging principle, principles of diversity, liquidity and profitability, cash flow principle, time value of money, and principles of return and risk. The primary areas of finance are of three, which includes investments, corporate finance, institutions and financial markets.
The sources of finance are venture funding, euro issue, letter of credit, working capital loans, term loans, retained earnings, debentures, equality, and so on, and these business sources of finance are used in a different situation and they are divided based on the source of generation, control, ownership, and time period.
Scoops and Benefits of financial management
The ultimate aim of financial management is to enhance the value of shareholder and the process will ensure the improving firm’s value, increasing margins, financial decisions, proper fund allocation, acquisition of funds and adequate financial planning.
Economic concepts like money value discounting factor, economic order quantity, micro, and macroeconomics are directly applied to the financial management approaches. Accounting plays a major role in financial management and decision making management. Financial management has a large number of concepts, statistical tools, and mathematical concepts, and also it allocates resources for marketing.