Financial Management

According to Wachowicz,


Financial Management concerns with the acquisition, financing, and management of assets with some overall goal in mind.

Three decisions are very important in Financial Management,

1. Investment Decision

2. Financing Decision

3. Asset Management Decision

Investment Decision:

Investment Decision is one of the most important of the three decision. It deals in deciding the optimal size of the firm. It answer the basic question of how much investment should be done. When size of firm is decided, the next thing is what specific asset should be aquired and what asset (should any)be reduced or eliminated.

Financing Decision:

When the investment decision has made, the next decision is what is the best type of financing; either it to finance with debt or equity. The financing mix should be decided in order to make a optimum balance between risk and return which is very important decision. Also the dividend policy should be considered carefully i.e either whole profit is to retained or any to be distributed among th shareholders, who are the owner of the firm.

Asset Management Decision:

Asset Management deals with how best is to manage the existing assets of the firm. Financial manager responsibility is more towards the current asset of the firm. The fixed assets is generally concern with the production/engineering manager’s responsibility.