reflection essay about financial management

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Financial management: reflection on the course.

622 words | 3 page(s)

Each course is a particular challenge, a new summit to conquer. For me, taking the course of financial management was another valuable contribution to personal development and a chance to cope with inner uncertainty in addressing challenging tasks. The best thing about this course is that it helped realize that any situation could be dealt with regardless of the initial fear and the belief that it would be too complicated to handle. Because the course was both fun and challenging, I do believe that the time and effort spent for taking it were not vain because they were a gigantic investment into the future career and personal life development. What I loved the most is the ability to develop in both individual and team-related aspects.

As a result, I not only obtained new knowledge but also acquired new skills that would undoubtedly be beneficial in my future life. Still, regardless of the value of new skills, knowledge is the main motivation for taking courses and making effort to complete them successfully. The financial management course helped become familiar with a lot of important and helpful concepts and topics. For me, the most challenging and interesting ones were the topics related to financial planning and estimating risks related to making investment decisions. I found them most interesting because they were the areas of the most significant knowledge attainment.

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In particular, I have learned that, except for the interest and exchange rate risks that I was aware of, other types of risks should as well be considered. They are market, liquidity, inflationary, and reinvestment risks as well as those deriving from the changes of political, social, and legal environment (Pandey, 2015). Also, I have found out that financial planning goes beyond the mere assessment of an individual’s current financial condition (Billingsley, Gitman, & Joehnk, 2017). Instead, the evaluation of the future financial status and forecasting future income is as well taking into consideration when creating and controlling the financial planning process.

The two topics mentioned above – financial planning and investment-related risks – are those that were of interest to me. Nevertheless, other concepts were as well covered by the course. In particular, significant attention was paid to financial performance assessment, developing cost-effective working capital strategy and understanding capital expenditure, and evaluating securities. Still, regardless of the value of the knowledge related to these themes, I had some background in them, so they were less challenging. Summing up the experience obtained during the course, I realize that I would like to apply the knowledge connected to planning and assessing investment-related risks in my personal life.

They could be valuable for understanding how to achieve one of my life goals – financial independence. In particular, I am interested in the opportunity to depend on investment-generated income instead of having to hope for the increase of wages. For this reason, adequate knowledge of the investment process and risks would be critical for choosing the right asset to invest in as well as create the most effective investment portfolio (Billingsley et al., 2017). More than that, applying financial planning knowledge would be of use for adequately assessing my financial status and allocating enough sources in the investment activities as well as considering those actions that would contribute to becoming financially independent.

Regardless of the interest in these two topics, all concepts learned during the course would be helpful for developing career in any sphere of business activities because financial management is the core of success. Still, I would like to acquire more knowledge on the two topics of interest as well as the assessment of financial performance. The latter would be a perfect supplementation for understanding whether my financial decisions are correct and helpful for a more effective and comprehensive financial planning process.

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Financial Management Reflection

Introduction.

Financial management (2010, para.1) defines financial management as planning for the future of a person or a business enterprise to ensure a positive cash flow. It captures the administration and proper management of financial assets. It also entails processes of identification and management of risks whereby reflective activity means integrating whatever has been learned in financial management into practice either where one is attached, in an internship or in gainful employment (Reuters, n.d,p.5). This essay is going to illuminate aspects of financial management and the reflective activities involved.

A financial manager is supposed to be having diverse knowledge relating to provision and interpretation of financial information, monitoring and interpreting cash flows and predicting future trends, managing budgets, efficient supervision of staff, conducting reviews and evaluation for cost reduction opportunities, analyzing competitors and market trends, and finally developing financial management mechanisms that minimize risks (Ray &Noreen, 1999, para 4).

Financial manager and management of budgets

Dosset (2004, p.1) posits that the drawing of good budgets is very central in the smooth running of any business venture. Good budgets are used for planning, coordinating and controlling the financial issues of an organization. In the budget, the financial managers address the fiscal integrity of an organization and the ongoing processes. The budget helps in formulation, presentation, and execution of planned activities by ensuring adjusting programs, review of reports, preparation of reports and controlling of funds (UNESCO,2006,p.6).

Managers and accounting

Financial manager’s work involves planning programs, adapting accounting systems, undertaking day-to-day maintenance of ledger, classification and recording of financial transactions, managing total accounting program, application of accounting concepts. (Prudential,2009, p.5).

Managers and managerial financial reporting

Managerial financial reporting encompasses recurring budget, accounting, financial reports, program operation evaluation, statistical reports and work performance reports. Involve provision of data to officials at different levels of management to come up with the most effective program (U.S. office of personnel management, 1963, p.5).

Financial managers and advice to managers

Financial managers offer advice to management from a financial perspective. They act as technical officers on matters pertaining to finances in any organization (U.S. office of personnel management, 1963, para.6).

Financial managers and paperwork management

They handle correspondence, control directives and disposition of records. They manage administrative control systems, services and processes (Debora, 2003, p.5).

Financial Managers and auditing

Auditing involves putting in place and modification of audit policies, programs, methods and procedures and attainment of high standards of auditing (Leacy, 2009, P.8).

The aspects of financial management that I have learned have been of great help to me especially when I was doing my internship in a renowned soft drinks processing company. I was able to use my statistical ability to collect and interpret quantified information relating to market trends. My knowledge of cost accounting enabled me to know how the beverage food company’s past performance was perceived by the competitors in the market. I was able to prepare reports that touched on the performance of different departments of the company. Some were updates on orders received by the company, sales and capacity utilization. I also prepared many analytical reports that touched on the profitability of different brands of beverages that we manufactured. I did reports that analyzed different developing opportunities in different locations of the country. When our company acquired a new production line and had to remove the line that there was there initially, some corporate organizations developed an interest in this old line. The services of an appraiser were then needed. I took the challenge and estimated the value of the old line appropriately. The appraisal process was accurate and all the parties were happy with whatever they got. My knowledge in auditing helped me to carry out basic and advance auditing techniques in different departments of the company. My knowledge of budget-making enabled me to draw budgets for different departments like the quality control department, production department, human resource department and marketing department. With the drawn budget, I was able to keep track of how different departments use the resources that were disbursed by creating a conducive environment for planning and controlling organizations’ funds. I was also in opposition to come up with the paperwork of the estimated income and expenditure of the organization. Most of the decision-making processes were made depending on the budget. The budgets I drew were used by the management of the beverage company to adjust, analyze and evaluate programs and activities. Future plans were made depending on the subsequent budgets drawn. At the beverage company, I did managerial financial reporting where I consolidated and reported on the company’s results. I prepared consolidated financial statements. I assisted in coming up with accounting policies and procedures. I oversaw the smooth operation and cost-effectiveness of operating procedures, programs and systems. When the external and internal auditors wanted assistance I was always willing to furnish them with the information they wanted.

Conclusions

Aspects of financial management like accounting, budgeting, managerial financial reporting, management analysis, auditing and statistics if substantially reflected in various government departments can help curb the loss of resources (University of Waterloo School of Accounting and Financial Management, n.d, p.6)

Debora, N. (2003). What is an Appraisal? Wise GEEK . Spark: Conjecture Corporation. Web.

Dosset, J.C. (2004). Budgets and Financial Management in Special Libraries.  Web.

Financial management. (2010). Economy Watch. Stanley: Stanley St Labs. Web.

Leacy, A. (2009). Financial manager . Prospects. Manchester: Manchester. Web.

Prudential. (2009). Manager Financial Reporting . New Jersey: Newark. Web.

Ray, H., Noreen, E. (1999). Introduction to Managerial Accounting. Accounting for management.com. Web. 

Reuters, T. (n.d.). Internal Auditing and Financial Management Package . New York: Web.

UNESCO. (2006). Budget and Financial Management . Paris: International Institute for Educational Planning. Web.

University of Waterloo School of Accounting and Financial Management. (n.d) Work term/ Professional reflection requirements . Waterloo: Ontario. Web.

U.S. office of personnel management. (1963). Position Classification Standards for Financial management Series.  Web.

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Essay on Financial Management

After reading this essay you will learn about:- 1. Introduction to Financial Management 2. Definition of Financial Management 3. Scope 4. Role in a Business 5. Financial Goals and Objectives 6. Functions.

Essay Contents:

• Essay on the Functions of Financial Management

Essay # 1. Introduction to Financial Management:

A business organisation seek to achieve their objectives by obtaining funds from various sources and then investing them in different types of assets, such as plant, buildings, machin­ery, vehicles etc. Financial management is managing the finances through scientific decision­-making.

For making right decisions, financial management needs to understand financial envi­ronment within which these decisions operate. Financial management will then be able to analyse these financial information’s to predict likely future results and to plan more carefully their proposed course of action.

ADVERTISEMENTS:

Financial management is concerned with the acquisition (investment), financing (arranging funds), and management of assets with some overall goal in mind. Invest­ment decisions begin with a determination of the total amount of assets required by the firm and to determine the money value of the same. Assets that cannot be economically justified, may be reduced, eliminated or replaced.

Financing decisions include decisions regarding mix of financing, type of financing em­ployed, dividend policy and method of acquiring funds i.e., getting a short term loan, or a long term lease arrangement, sale of bonds or stock.

Asset management decisions means managing the assets efficiently after their acquisition.

Success of a firm depends on the ability to raise funds, invest in assets and manage wisely.

Essay # 2. Definition of Financial Management:

Financial management is an internal part of overall management and not a staff function of the organization. It is not only restricted to fund raising process but also covers utilization of funds and monitoring its uses. The finance function is concerned with the process of acquiring an efficient utilization of funds of a business system, in order to maximize the value of the enterprise.

Financial management involves the application of principles of general management to the finance function. These functions influence the operations of other crucial functional areas of the enterprise or firm such as marketing production and personnel. Thus the overall survival of the firm is effected by it financial operations.

“The financial management deals with how the corporation obtains the funds and how it uses them.” —Hoagland

“The financial management refers to the application of skills in the manipulation, use and control of funds.” —Mock, Schultz and Schuckectat

Financial management can also be defined as that part of management, which is related mainly with raising or acquiring the funds for the enterprise or firm in the most economical way, utilizing those funds as profitably as possible, for a given risk level, planning the future investment of those funds and controlling the current performance plus future development by adopting budgeting, cost accounting and financial accounting.

Essay # 3. Scope and Functions of Financial Management :

The main objectives of financial management are to arrange the sufficient funds for meeting short term long term requirements of the enterprise. These finances are procured at minimum cost in order to maximize the profitability.

In view of these factors the financial management scope concentrates on the following areas of finance function.

(i) Estimating the Financial Requirements :

The first job of the finance manager of an enterprise is to estimate short term and long term financial requirements of his business. He will prepare a financial plan for present as well as future for this purpose.

The finance required for procuring fixed assets as well as the working capital needs will have to be ascertained. The estimations should be based on sound financial principles so that funds available with the firm are neither inadequate nor excess.

(ii) Determining the Capital Structure :

After estimating the financial requirements, the finance executives have to decide about the composition of capital. The capital structure refers to the type and proportion of different securities for raising funds. After deciding the quantum of funds needed it should be decided which type of securities should be raised.

The finance executives have to determine the relative proportions of owner’s risk capital and borrowed capital along with short term and long term debt equity ratio.

A decision regarding various sources of funds should be linked with the cost of raising funds. A decision about the kind of securities to be employed and the proportion in which these should be utilized is an important decision which affects the short term and long term financial planning of an enterprise.

(iii) Choice of Sources of Finance :

After preparing a capital structure an appropriate source of finance is chosen. Various sources from which finance may be raised include: shareholders’ debenture holders, banks and other financial institutions and public deposits etc. Finance executive has to evaluate each source or method of finance and select the best source keeping in view the various factors.

The need, purpose, objective, cost involved may be the factors affecting the selection of a suitable source of financing, for instance, if the finances are required for short periods then banks, public deposits and financial institutions may be appropriate, and for long term financial requirements, the share capital and debentures may be useful.

(iv) Investment Decisions :

When the funds have been poured then a decision regarding pattern of investment has to be taken. The funds raised are to be intelligently invested in various assets so as to optimize the returns on investment. The funds will have to be used first for the purchase of fixed assets and then an appropriate part will be retained as working capital.

The utilisation of long term funds requires a proper assessment of different alternatives through capital budgeting and opportunity cost analysis. While spending on various assets, management should be guided by three important principles of safety, liquidity and profitability. A balance should be struck even in these principles for the purpose of optimum returns on investment.

(v) Management of Profits :

The utilisation of surpluses or earnings is also an important factor in financial management. A judicious utilisation of earnings is essential for expansion and diversification plans of the enterprise.

A certain amount out of the total profit may be kept as reserve voluntarily, a portion of surplus may be distributed among the ordinary and preference shareholders, yet another portion may be reinvested. The finance executive must take into consideration the merits and demerits of the alternative scheme of utilizing the funds generated from the enterprise’s own earnings.

(vi) Management of Cash Flow :

Cash flow management is also an important task of finance executive. He has to assess the various cash requirements at different times and then make arrangements for cash needed. Cash may be required to (i) make payments to creditors (ii) for purchase of materials (iii) to meet wage bill (iv) to meet everyday expenses.

The cash management should be such that neither there is shortage of it and nor it is idle. Any shortage of cash will damage the credit worthiness of the firm. The idle cash with the enterprise will mean that it is not properly utilized. In order to know the cash requirements during different periods, the management should arrange for the preparation of cash flow statement in advance.

(vii) Implementation of Financial Controls :

An efficient system of financial management needs the use of various control of devices. Financial control devices generally adopted are (i) Return on Investment (ii) Budgetrary Control (iii) Cost control (iv) Break Even analysis (v) Ratio analysis. The use of various control techniques by the Finance Manager will help him in evaluating the performance in different areas and take corrective action whenever needed.

Essay # 4. Role of Financial Management in a Business:

An effective financial management plays a dynamic role in a modern company’s develop­ment.

In earlier days, financial managers were primarily engaged in:

(a) Raising funds, and

(b) Managing the firms cash flow.

But now-a-days with the developments and increasing complexi­ties in the business, responsibility of the financial managers have increased and they are now concerned with the decision-making process involving finance, i.e., capital investment.

Today external factors, like competition, technological change, economic uncertainty, infla­tion problem etc., create financial managers problem more complicated. He must have flexibil­ity to adopt to the changing external environment for the survival of his firm.

Thus in addition to the job of acquisition, financing and managing the assets, the financial manager is supposed to contribute to the fortunes of the firm and to the optimal growth of the economy as a whole.

He is required to take decisions on:

(i) Investing funds in assets, and

(ii) Obtaining best mix of financing and dividends.

In order to understand the environment in which a finance manager is required to take decision, a sketch indicating business system is given hereunder:

The Financial Management’s main role is therefore to create profit on the capital invested (fixed as well as working capital). Each and every decision related to finance/economy must be optimal. Every business enterprise is set up to earn profit, and no one is interested in taking risk unless he is assured of fair return on the investment. However government organisations have no profit motive but are created to serve the public.

The profit earned by a firm is used for:

(a) Future expansion.

(b) Distributing profit as rewards to owners/shareholders.

Profit earned also serves as an indicator of efficiency and performance of the firm. So as to enable to perform the role of financial management, financial managers must be given proper authority, autonomy, freedom of actions, supporting staff, system for providing necessary information. He should be accountable also for his role.

Essay # 5. Financial Goals and Objectives :

There may be various objectives of a firm, but the goal of a firm is to maximise the wealth of the firm’s owners. Thus we can say that, “the improvement of shareholders value is the one mission that continually guides all corporate decisions and actions” or “the goal of a firm is maximizing the shareholders’ value”. This maximisation of value should be achieved from long term point of view.

The financial goal can be expressed as:

(a) Required profit levels,

(b) Earnings per shares, and

(c) Required rate of return on investment.

For a large firm, where shareholders do not have direct say and the firm is managed by the management, an ordinary shareholder can judge the performance by the market price of the firm’s share. Market price serves as a gauge for business performance, it indicates how well management is doing on behalf of its shareholders.

Management is the agents of the owners or shareholders, and financial management acts for achieving the goal of profit maximization in the shareholders’ best interests.

Social Goals :

While profit maximisation is the primary goal for any business organisation, social respon­sibility is also important for them. In case of Government organisations and public sector organisations, social responsibility is the primary goal and profit is secondary.

Social responsi­bility includes service to the people, protecting the consumer, paying fare wages to the employ­ees, upliftment of the weaker sections, welfare facilities like medical education, environment improvement programmes etc.

Financial Objectives :

In making financial decisions, it is important to set out clear objectives.

Following are the basic financial objectives:

(a) Profit maximisation.

(b) Maximisation of shareholders’ owners’ wealth.

(c) Reduction in cost.

(d) Minimising risks.

(e) Sustained increase in the value of firm

(f) Wealth maximisation.

Essay # 6. Functions of Financial Management :

Financial manager is concerned with the following aspects:

1. Identifying the present strengths and weaknesses of the organisation, and the scope for improvement, by conducting the financial analysis.

2. Planning the financial strategies. This involves the consideration of methods and levels of funds raising, profitability and the financing of expansion plan of the organisation.

3. Arranging the funds when required, in the form needed in the most economical way.

4. Conducting financial appraisal of the possible courses of action. The appraisals are needed in respect of possible take overs and mergers, analysis of capital projects, or alternative methods of funding.

5. Advising about capital structure.

6. Consideration of an appropriate level for drawings by dividends to the owners/ share­holders.

7. Ensuring that assets are controlled and used in an efficient manner.

8. Cash management. Preparation of detailed cash budgets and/or forecast funds flow statement so that future problems can be foreseen and remedial measures taken in advance. These take care of both shortage and excess of cash. Finance managers must find ways of raising more funds needed, or investing excess funds for an appropriate length of time.

9. Finance managers are likely to draw attention on other disciplines also, like account­ing and budgeting.

In order to enable financial managers to perform above functions satisfactorily, he must have good knowledge of accounting, economics, mathematics, statistics, law especially taxa­tion, financial market etc.

The functions of finance thus involve three major decisions the firm must make:

(a) The investment decisions,

(b) The financing decisions, and

(c) The dividend decisions.

Each of these decisions are taken in relation to the objective of the firm, an optimal combi­nation of these three will maximise the value of the firm to its shareholders. Since the decisions are interrelated, their joint impact on the market price of the firm’s stock must be considered.

(a) Investment Decisions:

This is the most important decision. Capital investment, i.e., allocation of capital to investment proposals is the most important aspect, whose benefits are to be realised in future. As future benefits are not known with certainty, the investment proposals involve risk.

These should, therefore, be evaluated in relation to expected return and risk. Considerable attention is paid to determine the appropriate required rate of return on the investment.

In addition to taking capital investment decisions, finance managers are concerned with the management of current assets efficiently in order to maximise profitability relative to the amount of funds tied up in asset. Investment decisions also include the decisions about mergers and acquisition of another company.

(b) Financing Decisions:

Finance manager is required to determine the best financing mix or capital structure. An optimal financing mix is one in which market price per share could be maximised. Financing decision are taken in relation to the overall valuation of the firm.

Various methods of obtaining short, intermediate, and long term financing are also explored, examined, analysed and a decision is taken. While taking financing decisions, the influence of inflammation on financial markets and on the cost of funds to the firm is also considered.

(c) Dividend Decision:

The dividend decision includes the percentage of earnings paid to stockholders in cash dividends, stock dividends and splits, and the repurchase of stock.

To Meet Funds Requirement of a Firm :

Funds requirement is assessed for different purposes, namely for feasibility study of a project, detailed planning of a project, and for operation and expansion of the business.

For feasibility study, only broad estimates are sufficient and are generally obtained from the past experience of the similar works by interpolating the present trends and the condition of the proposed project in comparison to the one whose figures are being adopted. While during detailed plan­ning, estimated requirement is comparatively more realistic, and prepared after going into details more thoroughly.

Here we are discussing the funds requirement for a running business including its long term planning for expansion.

The main function of financial management is to ensure that the firm must have sufficient funds to meet financial obligations when they are needed and to take advantage of investment opportunities. To achieve this objective, a thorough study is conducted about ‘flow of funds’ i.e., statement of funds requirement indicating the amount of fund needed and at what time.

This ‘statement of funds’ is a summary of a firm’s changes in financial position from one period to another. This indicates that how the funds will be used and how it will be financed over specific period of time. This includes the cash as well as non-cash transactions.

Forecast, financial statements are prepared for selected future dates, generally for middle term and long term plans of the firm. Budgets are used for one year, and are prepared only to fulfill the firms’ objectives envisaged in the forecast for that particular year.

These forecast financial statements are based on the sales forecast and future strategies for expanding the business, and includes, forecast income statements, forecast assets, liabilities, shareholders, equity etc.

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• Essay on Financial Management: Objectives, Scope and Functions
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Reflective Essay on Financial Management

Introduction.

Growing up, I was not concerned about matters related to financial management since my parents often intervened in situations that involved finances. However, at adolescent stage, the desire to be independent changed my perspective on financial management. As such, I began to save in order to take care of my financial needs instead of depending solely on my parents and older siblings (Xiao et al. 398). Saving money necessary to attend to my needs was a challenging process as I was a spendthrift. For a long time, it was almost impossible to stay afloat as I kept engaging in impulse buying and I was constantly broke. As a result, I kept seeking financial help from significant others even though I desired for financial independence. My struggle in terms of managing my finances got worse when I joined college, which was far from home and had to relocate.

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Financial Challenges I Have Overcome in My Life

As a common norm, when one approaches adulthood, there is a desire for financial independence from significant others such as parents or older siblings (Shim et al. 716). Subsequently, one is bound to start contemplating how to lead his or her life, separate from significant others. Important issues to consider in achieving such a goal is financial stability that can sustain one away from home and avoid depending on parents' financial support. In this regard, the first agenda that often comes to a young adult's thought process is how to secure a job to improve his or her income status as an individual (Shim et al. 721). However, the challenge that often grapples a young adult trying to save money to make life-changing goals is impulsiveness (Xu 39).

Youthful life is characterized by a desire to explore new things as one search for a sense of identity. Consequently, some of the financial decisions that a youthful person may make are often irrational without the consideration of eventual outcomes. In this respect, one seldom make the right decision regarding appropriate management of his or her finances and may struggle without financial assistance especially in situations where one has left home and supporting himself or herself financially. In a scenario where a young adult has left home and is trying to make a living on his or her own, lack of experience on how to save hard earned money can cause numerous financial problems. For instance, the youth are accustomed to impulse buying and most products and services today are increasingly targeting the youth due to their buying behavior such as willingness to spend on new and popular products and services in the marketplace. As a result, spendthrift behavior often leaves a significant number of young adults without money to cater for their basic needs and are constantly forced to seek for financial assistance from family members and friends (Xu 41).

Myself, I have struggled with impulse buying and been unable to save money on numerous occasions. Consequently, I have often found myself in situations where I cannot meet my financial obligations as an individual. Having left home when I joined college, I decided to rent an apartment and was successful to secure a job that I thought could make me financially independent and avoid seeking financial help from significant others. However, due to my spendthrift habit, I struggled to pay for my expenses such as rent, buying food and medical costs. Even though student loan covered my tuition fee, I still struggled to pay for meager expenses because I could not manage to save money that I earned from my side jobs while attending college.

Eventually, life became unbearable away from home and I ended up transferring my credits to a college near my parents' home since I resorted to depending on them for my financial needs. While at home, I still had financial needs that I was not comfortable burdening my parents. As such, I secured another job, hoping to save and avoid depending solely on my parents for all my financial needs. Still, I could not manage to contain my overspending habit and was often broke despite having a job and not obligated to pay most of my expenses since my parents often stepped in to lend a hand. As things got worse for my financial life, I decide to seek help from my elder brother who is leaving independently without assistance from our parents. I shared with him the spending habit that often leaves me without any coin and thus being unable to manage my own financial needs. Through his advice, I learned the necessity of having a budget to avoid overspending (Gutter and Zeynep 708). In most of the occasions that I spent all the money I earned from my side jobs, I never prepared a budget for my expenses. Further, my elder brother also enlightened me on the need to align my savings with lifelong goals (Shim et al. 722). He also shared with me the necessity of opening a bank account such as savings account where I could only withdraw occasionally compared to having all the money in my wallet. In our conversation, my brother also shared various ways on how I could invest the money that I earned from my side jobs to give me some level of financial stability (Babiarz and Cliff 43). In essence, major financial hurdles that I had to overcome were overspending and compulsive buying.

The Lessons that Overspending and Impulse Buying Taught Me

Overspending makes it hard for one to save because being a spendthrift often leaves an individual without a coin to save. A spender also tends to ignore factors such as considering costs against the benefits of spending on a particular product or service. As a result, one may end up spending his or her hard-earned money on a product or service that may not add value to his or her life. On the other hand, impulse buying as I have learned is mostly influenced by lack of a proper budget on what to buy. As such, one may end up making purchases that he or she had no prior plans thus compromising plans to save for other important financial needs (Babiarz and Cliff 45).

Overall, I have learnt that in order to avoid being caught in a financial quagmire, it is important to have a plan on how to spend money in tandem with well-defined lifelong goals. Similarly, preparing a budget on how to use money gives one a clue on the expected amount to spend on daily expenses as well as save from receivable income. In addition, one should consider the available methods of saving offered by financial institutions that range from opening savings account to investing in assets, shares and bonds as a way to improve future financial status necessary to manage constantly changing financial demands over the duration of an individual's lifetime.

Works Cited

Babiarz, Patryk., and Cliff A. Robb. "Financial literacy and emergency saving." Journal of Family and Economic Issues, vol. 35, no.1, 2014, pp. 40-50.

Gutter, Michael., and Zeynep, Copur. "Financial behaviors and financial well-being of college students: Evidence from a national survey." Journal of Family and Economic Issues, vol. 32, no.4, 2011, pp. 699-714.

Shim, Soyeon., Jing J. Xiao., Bonnie L. Barber., and Angela C. Lyons. "Pathways to life success: A conceptual model of financial well-being for young adults." Journal of Applied Developmental Psychology, vol. 30, no. 6, 2009, pp.708-723.

Xiao, Jing Jian, Swarn Chatterjee, and Jinhee Kim. "Factors associated with financial independence of young adults." International Journal of Consumer Studies, vol. 38, no.4, 2014, pp. 394-403.

Xu, Yingjiao. "The influence of public self-consciousness and materialism on young consumers' compulsive buying." Young Consumers, vol. 9, no.1, 2008, pp. 37-48.

What are some common financial challenges faced by young adults?

Young adults often face difficulty when it comes to managing their financial independence and expenses effectively. Impulse buying and overspending can become serious obstacles to saving money and meeting obligations on time.

How can overspending and impulse buying affect one's financial stability?

Overspending and impulse purchasing can make saving money and reaching financial goals challenging for individuals. They could spend their hard-earned funds on non-essential products or services instead, leaving no funds for meeting essential needs or saving for the future.

What strategies can help overcome overspending and impulse buying habits?

Planning ahead by creating a budget that aligns expenses with long-term goals can help individuals avoid overspending and impulse buys. Establishing plans for spending and saving, opening savings accounts and exploring investment options can promote financial security while helping individuals manage changing demands in life.

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Financial Management Explained: Scope, Objectives & Importance

In business, financial management is the practice of handling a company’s finances in a way that allows it to be successful and compliant with regulations. That takes both a high-level plan and boots-on-the-ground execution.

What Is Financial Management?

At its core, financial management is the practice of making a business plan and then ensuring all departments stay on track. Solid financial management enables the CFO or VP of finance to provide data that supports creation of a long-range vision, informs decisions on where to invest, and yields insights on how to fund those investments, liquidity, profitability, cash runway and more.

ERP software can help finance teams achieve these goals: A financial management system combines several financial functions, such as accounting, fixed-asset management, revenue recognition and payment processing. By integrating these key components, a financial management system ensures real-time visibility into the financial state of a company while facilitating day-to-day operations, like period-end close processes.

Video: What Is Financial Management?

Objectives of Financial Management

Building on those pillars, financial managers help their companies in a variety of ways, including but not limited to:

• Maximizing profits: Provide insights on, for example, rising costs of raw materials that might trigger an increase in the cost of goods sold.
• Tracking liquidity and cash flow: Ensure the company has enough money on hand to meet its obligations.
• Ensuring compliance: Keep up with state, federal and industry-specific regulations.
• Developing financial scenarios: These are based on the business’ current state and forecasts that assume a wide range of outcomes based on possible market conditions.
• Manage relationships: Dealing effectively with investors and the boards of directors .

Ultimately, it’s about applying effective management principles to the company’s financial structure.

Scope of Financial Management

Financial management encompasses four major areas:

The financial manager projects how much money the company will need in order to maintain positive cash flow, allocate funds to grow or add new products or services and cope with unexpected events, and shares that information with business colleagues.

Planning may be broken down into categories including capital expenses, T&E and workforce and indirect and operational expenses.

The financial manager allocates the company’s available funds to meet costs, such as mortgages or rents, salaries, raw materials, employee T&E and other obligations. Ideally there will be some left to put aside for emergencies and to fund new business opportunities.

Companies generally have a master budget and may have separate sub documents covering, for example, cash flow and operations; budgets may be static or flexible .

Static vs. Flexible Budgeting

Managing and assessing risk.

Line-of-business executives look to their financial managers to assess and provide compensating controls for a variety of risks, including:

Affects the business’ investments as well as, for public companies, reporting and stock performance. May also reflect financial risk particular to the industry, such as a pandemic affecting restaurants or the shift of retail to a direct-to-consumer model .

The effects of, for example, customers not paying their invoices on time and thus the business not having funds to meet obligations, which may adversely affect creditworthiness and valuation, which dictates ability to borrow at favorable rates .

Finance teams must track current cash flow, estimate future cash needs and be prepared to free up working capital as needed.

This is a catch-all category, and one new to some finance teams. It may include, for example, the risk of a cyber-attack and whether to purchase cybersecurity insurance , what disaster recovery and business continuity plans are in place and what crisis management practices are triggered if a senior executive is accused of fraud or misconduct.

The financial manager sets procedures regarding how the finance team will process and distribute financial data, like invoices, payments and reports, with security and accuracy. These written procedures also outline who is responsible for making financial decisions at the company — and who signs off on those decisions.

Companies don’t need to start from scratch; there are policy and procedure templates available for a variety of organization types, such as this one for nonprofits.

Functions of Financial Management

More practically, a financial manager’s activities in the above areas revolve around planning and forecasting and controlling expenditures.

The FP&A function includes issuing P&L statements, analyzing which product lines or services have the highest profit margin or contribute the most to net profitability, maintaining the budget and forecasting the company’s future financial performance and scenario planning.

Managing cash flow is also key. The financial manager must make sure there’s enough cash on hand for day-to-day operations, like paying workers and purchasing raw materials for production. This involves overseeing cash as it flows both in and out of the business, a practice called cash management.

Along with cash management, financial management includes revenue recognition, or reporting the company’s revenue according to standard accounting principles. Balancing accounts receivable turnover ratios is a key part of strategic cash conservation and management. This may sound simple, but it isn’t always: At some companies, customers might pay months after receiving your service. At what point do you consider that money “yours” — and report the good news to investors?

Finally, managing financial controls involves analyzing how the company is performing financially compared with its plans and budgets. Methods for doing this include financial ratio analysis, in which the financial manager compares line items on the company’s financial statements.

Strategic vs. Tactical Financial Management

On a tactical level, financial management procedures govern how you process daily transactions, perform the monthly financial close, compare actual spending to what’s budgeted and ensure you meet auditor and tax requirements.

On a more strategic level, financial management feeds into vital FP&A (financial planning and analysis) and visioning activities, where finance leaders use data to help line-of-business colleagues plan future investments, spot opportunities and build resilient companies.

Importance of Financial Management

Solid financial management provides the foundation for three pillars of sound fiscal governance:

Strategizing

Identifying what needs to happen financially for the company to achieve its short- and long-term goals. Leaders need insights into current performance for scenario planning , for example.

Decision-making

Helping business leaders decide the best way to execute on plans by providing up-to-date financial reports and data on relevant KPIs.

Controlling

Ensuring each department is contributing to the vision and operating within budget and in alignment with strategy.

With effective financial management, all employees know where the company is headed, and they have visibility into progress.

What Are the Three Types of Financial Management?

The functions above can be grouped into three broader types of financial management:

Capital budgeting

Relates to identifying what needs to happen financially for the company to achieve its short- and long-term goals. Where should capital funds be expended to support growth ?

Capital structure

Determine how to pay for operations and/or growth. If interest rates are low, taking on debt might be the best answer. A company might also seek funding from a private equity firm , consider selling assets like real estate or, where applicable, selling equity.

Working capital management

As discussed above, is making sure there’s enough cash on hand for day-to-day operations, like paying workers and purchasing raw materials for production.

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What Is an Example of Financial Management?

We’ve covered some examples of financial management in the “functions” section above. Now, let’s cover how they all work together:

Say the CEO of a toothpaste company wants to introduce a new product: toothbrushes. She’ll call on her team to estimate the cost of producing the toothbrushes and the financial manager to determine where those funds should come from — for example, a bank loan.

The financial manager will acquire those funds and ensure they’re allocated to manufacture toothbrushes in the most cost-effective way possible. Assuming the toothbrushes sell well, the financial manager will gather data to help the management team decide whether to put the profits toward producing more toothbrushes, start a line of mouthwashes, pay a dividend to shareholders or take some other action.

Throughout the process, the financial manager will ensure the company has enough cash on hand to pay the new workers producing the toothbrushes. She’ll also analyze whether the company is spending and generating as much money as she estimated when she budgeted for the project.

NetSuite: Financial Management for Startups and Beyond

At the outset, financial management responsibilities within a startup include making and sticking to a budget that aligns with the business plan, evaluating what to do with profits and making sure your bills get paid and that customers pay you.

Financial management gets more complicated as the company grows and adds finance and accounting contractors or staffers. You must ensure your employees get paid with accurate deductions, properly file taxes and financial statements, and watch for errors and fraud.

This all circles back to our opening discussion of balancing strategic and tactical. By building a plan, you can answer the big questions: Are our goods and services profitable? Can we afford to launch a new product or make that hire? What might the coming 12 to 18 months bring for the business? Solid financial management provides the systems and processes to answer those questions.

Financial management challenges can be daunting for both startups and growing businesses. This is where NetSuite's financial management software comes into play. With its comprehensive, cloud-based solutions, NetSuite ensures that your financial data is accurate, up-to-date, and accessible anytime, anywhere.

From automating complex financial processes to offering real-time visibility into performance, NetSuite is the go-to solution for businesses aiming for seamless integration and efficient financial operations. As your company expands, NetSuite scales with you, ensuring you have the right tools to make informed strategic decisions at every stage. Make the smart choice for your business's financial future with NetSuite.

Financial Management

What is Financial Contingency Plan? A Step-by-Step Guide to Creating One

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Essay on Financial Literacy for Students and Children

Importance of financial literacy, an introduction to financial literacy.

We go to schools, colleges, universities to complete our educated and start earning our livelihood. We take up jobs, practise professions or start our own businesses so that we can earn money to make our living. But which of these institutions make us capable of managing our own hard-earned money? Probably a very few of them. 

Our ability to effectively manage our money by drawing systematic budgets, paying off our debts, making buying and selling decisions and ultimately becoming financially self-sustainable is known as financial literacy. 

Financial literacy is knowing the basic financial management principles and applying them in our day-to-day life. 

Financial Literacy – What does it Involve? 

From simple practices like keeping a track of our expenses and understanding the need to spend money if we like a product to striking a balance between the value of time saved and money lost, paying our taxes and filing of tax returns, finalizing the property deals, etc – everything becomes a part of financial literacy. 

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As human beings, we are not expected to know the nitty-gritty of financial management. But managing our own money in a way that it does not affect us and our family in a negative way is important. We certainly do not want to end up having a day with no money at hand and hunger in our stomach. 

Why is Financial Literacy so Important?

Financial literacy can enable an individual to build up a budgetary guide to distinguish what he buys, what he spends, and what he owes. This subject additionally influences entrepreneurs, who incredibly add to financial development and strength of our economy. 

Financial literacy helps people in becoming independent and self-sufficient. It empowers you with basic knowledge of investment options, financial markets, capital budgeting, etc.

Understanding your money mitigates the danger of facing a fraud-like situation. A few strategies are anything but difficult to accept, particularly when they’re originating from somebody who is by all accounts learned and planned. Basic knowledge of financial literacy will help people with foreseeing the risks and argue/justify with anyone learned and well-informed.

What should you read on / get informed about in Financial Literacy?

• Budgeting and techniques of budgeting
• Direct and indirect taxation system
• Direct tax slabs
• Income and expense tracking 
• Loans and debt – EMI management 
• Interest rate systems: fixed versus floating
• Business and organisational transaction studies
• Elementary Book-keeping and Accountancy
• Cash in-flow and out-flow Statements
• Investment & personal finance management
• Asset management:
• Business negotiation skills and techniques
• Make or buy decision-making
• Financial markets 
• Capital structure – owner’s funds and borrowed funds
• Fundamentals of Risk Management
• Microeconomics and Macroeconomics fundamentals

While there are various media to learn about financial literacy, we recommend that you join a short-term, weekend programme which helps you get financially literate.

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Reflection on Financial Statements Essay

IAS 1 requires that at the minimum, any business should prepare four types of financial statements . Balance sheets indicate what the entity owns and owes at that particular point in time. They include assets, shareholder’s equity and liabilities. Assets are the properties that the companies own that can be valued while liabilities are the amounts owed to others. Income statements are different in that they only indicate what the business entity has made and spent over a fixed period. Cash flow statements show the exchange or flow of cash between the business entity and the economy. The difference between an income statement and a cash flow statement is that the latter shows whether the company has generated cash while the former indicates whether it has made profits. The statement of shareholder’s equity shows the changes to the equity component of the balance sheet that includes shares, retained earnings and other forms of comprehensive income.

Analyzing financial statements is an important part of decision making because finances and the valuation of profits and losses are the most important drivers in business. They are used to diagnose weak spots in the current strategy in an internal perspective, key in making decisions to mitigate against such losses. For external decision makers, reviewing the components of financial statements are important in ascertaining the situation at the company, the effects of the current decision-making strategies. Such analysis can only be relevant when relevant data is used and when such data is correct and timely. The decision-maker should then make the decision in time to reinforce the strengths and solve the weak spots. Decision makers who use financial statements assess the effects of certain activities to reveal the internal forces within the company. They look for ways of increasing the effectiveness of the activity and the productivity of the factors of production. Horizontal analysis of financial statements is where the components are compared over a period. Vertical analysis, on the other hand, is whereas component is compared to another within the same accounting period.

The Sarbanes-Oxley Act (2002) was enacted as a response to financial scandals at WorldCom and Enron that resulted in loss of investments from shareholders. It applies to all public companies in the US as well as their subsidiaries, all foreign companies that trade shares in US stock exchange. Under this law, the ultimate responsibility of ascertaining the financial statements is placed on the CEO and the CFO. In Section 404, the Act also requires that these executives have control over the finances of the company and should therefore have evaluated the effectiveness of the current systems, process and measures for financial control.

The 11-Title Act addresses almost all aspects of financial reporting and control. It means that companies now have to ensure that any process that has a financial implication is correctly documented in real-time and accounted for. The standard data-entry system also means that an ethical and easy-to-understand financial practice is in place.

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Reflection on Financial Management

Description Take a moment and reflect on the content in this course (Financial Marketing): What did you find enlightening? Did you find anything that was surprising to you? What did you find to be the most useful information for you as a business professional? Get professional assignment help cheaply Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent? Whichever your reason may is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments. Our essay writers are graduates with diplomas, bachelor, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college diploma. When assigning your order, we match the paper subject with the area of specialization of the writer.

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