Financial management essay

To achieve the primary goal it is necessary to meet a set of particular objectives. Objectives of financial Management include:
– Ensuring the formation of the financial resources needed to ensure the planned activities;
– Ensuring the most efficient use of financial resources;
– Optimization of cash flow;
– Optimization of expenditure;
– Maximization of profits of the enterprise;
– Minimization of the level of financial risk;
– Constant financial balance of the enterprise.
– Ensuring sustainable growth of economic potential;
– Assessment of potential financial capacity of enterprises in the coming periods;
- Ensure the profitability of the target;
- To avoid bankruptcy (crisis management);
– To ensure ongoing financial stability of the organization. (Brigham and Houston 2009)

Lets consider how to implement these objectives of financial management.

1. Ensure formation of sufficient financial resources in accordance with the objectives of the enterprise in the planned period. This task is accomplished by determining the total funding needs for the coming period, maximum use of  own financial resources from domestic sources, determining the feasibility of formation of financial resources from external sources, management of leveraged funds, optimization of the structure of financial sources of the resource potential.

2. Optimization of the cash flow. This problem can be solved by efficient management of the company’s cash flow in the circuit of its funds, ensuring synchronization of the volume of receipts and expenditure of funds for specific periods, maintaining the necessary liquidity to current assets. One of the results of this optimization is minimization of the average balance of available cash assets, reducing the losses from inefficiencies and inflation.

3. Ensuring the most effective use of financial resources generated in the context of the main activities of the enterprise. Optimization of distribution of the generated amount of financial resources provides establishment of the necessary proportionality in their use for the purposes of industrial and social development of the company, payment of the required level of income on investment business owners, etc. In the process of industrial consumption of financial resources generated in the context of the main activities of the enterprise, it is necessary to take into account the strategic objectives of its development and possible rate of return of the funds invested.

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