What is Financial Management? Types, Functions, Objectives.

Financial management is the diplomatic planning, organizing, directing, and supervising of financial undertakings within an organization. It also involves applying management principles to financial resources to play a significant role in economic management. Organizations typically have a dedicated department or a finance manager to handle all financial decisions and resource management.

The objectives of financial management include maximizing profits by providing insights on costs and pricing, securing adequate returns for shareholders based on earning capability and market value, tracking liquidity and cash flow to meet organizational requirements, ensuring optimum utilization of procured funds at the least cost, providing safety on investment by selecting safe ventures with acceptable returns, and planning a sound capital structure to maintain a balance between debt and equity capital.

Key functions of financial management involve calculating the required capital by estimating fund needs based on policies and profit expectations, determining capital structure by deciding the mix of debt, equity, and short/long-term capital for minimum cost and maximum shareholder wealth, choosing sources of funds from various options like investors and banks, investing capital in secure and effective ventures to earn returns, procuring funds through consultation and issue of prospectus considering market situations and government policy, allocating profits efficiently for emergencies, innovation, expansion, and shareholder rewards, and financial control through forecasting, ratio evaluation, risk management, and profit/cost control.

There are three main types of financial management. Capital budgeting involves determining financial needs for short-term and long-term objectives and how to spend capital funds for growth, as well as raising and investing funds. Capital structure focuses on how to pay for operations and growth, considering debt, equity, and asset sales to manage the company's debt-to-equity ratio and assess financial strength. Working capital management deals with managing current assets, debts, cash flow, and inventory turnover to ensure adequate liquid cash for short-term debts, operational costs, and increasing company earnings.