The Five Practices Of Financial Management

The success of a business depends on its ability to remain profitable over the long term, while being able to pay all its financial obligations and earning above average returns for its shareholders. This is made possible if the business is able to maximize on available opportunities and very efficiently and effectively use the resources it has to create maximum value for all involved stakeholders. One way the performance of a company can be measured on critical areas such as profitability, its ability to stay solvent, the amount of debt exposure and the effectiveness in resource utilization, is performing financial analysis where a set of ratios provides a snapshot of company performance and future

"First and foremost, financial management is a decision science. Whereas accounting provides decision makers with a rational means by which to budget for and measure a business’s financial performance, financial management provides the theory, concepts, and tools necessary to make better decisions” (Gapenski, 2007).

Finance, understanding how it affects the smallest business to the largest organization, is the origin to financial success in businesses. According to Gitman (2006), finance is the art and science of managing money. Virtually every individual business and large organization, Be the organization for profit or non-profit, depends on the rates at which these entities earn, or raise money, and the rate at which they spend or invest these earned monies. Understanding these financial processes will enable the financial manager, or even the non-financial managers to more effectively interact with financial personnel, processes, and procedures.

Throughout this paper a summary of the four elements of financial management will be discussed. A summary of generally acceptable accounting

A key role financial organisation plays for the duration of both planning and development stages, is to produce and relay information to management, shareholders, and stakeholders showing in monetary values the economic stability of business resources (Noll and Zimbalist, 1997). These responsibilities can be categorised as: overseeing financial risk, protecting the integrity of company finances, motivating managers to establish competitive value, attracting money into company projects, future proof planning and controlling performance improvement (Bonham and Langdon,

According to Titman et al. 2012, “Financial management is the study of how people and businesses evaluate investments and raise funds to finance them” (Titan, 2012, p. 3). Lately, it has become very important to investors and creditors to pay attention to the data and statistics that are being released by companies and their financial status. The information that is released in these statements allows investors and creditors to know the safety and profitability of their investments.

| The "apparent," but not the "true," financial position of a company whose sales are seasonal can differ dramatically, depending on the time of year when the financial statements are constructed.

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The scope of the financial management is to secure the capital needed by the enterprise, and

Financial statements are used to track performance and explain differences in multiple companies (Melicher & Norton, 2013). The information available on these reports is important to have if you run a company, or are researching it for investment purposes. These statements can show where money could have been saved, or used in a different way. They are a useful tool for management to adjust their approach as needed. There are different industries, which results in a variety of assets, liabilities, products, services, and approaches to producing profit (Melicher & Norton). There are large and small companies and financial statements provide a way to research and, or compare them. The following will discuss financial statements, including income statements, balance sheets, and statement of cash flows.

Financial Management refers to the proper management of finance functions of an enterprise or organization. In other words, financial management is concerned with the financial decision-making and other financial aspects. Thus, financial management involves financial planning, financial organization, financial coordination and control, financial reporting, financial mergers, combinations and acquisitions, insurance and tax management etc. Financial planning is concerned with the act of deciding in advance the financial activities that are essential if the enterprises are to achieve their financial goals and objectives. These

Finance has an important role to play in all types of organization. But many thinkers presented their different views on how the finance performs

The financial perspective uses financial performance measures to determine whether the organization’s strategy and actions are profitable. An organization’s financial goals may be as simple as: to survive, to succeed, and to prosper. Survival can be measured by cash flow, success can be measured by growth in sales and income, and prosperity can be measured by increased market share and return on equity. Managers are encouraged to use financial measures like these to demonstrate their financial position to shareholders. (Kaplan and Norton

The decisions of financial managers are capital structure, working capital management and capital budgeting. A financial manager has to decide on the type of investments that the company should undertake (Siegel & Shim, 2009). Financial managers help the company make decisions on how the company invests their funds; company has to have a diversity of real assets in order to operate successfully. Most of the company’s assets are tangible, meaning things such as machinery the company use, offices equipment etc.…; the company’s trademark, and patents are intangible. In order for the company to pay for all of their assets it has to sell assets, or securities, for instances, if a company borrows money from a financial institution, the financial institution would have that financial asset; in turn that asset gives an institutional claim on the interest payments. Therefore, the company’s real assets need to produce sufficient revenue to satisfy the financial institution 's entitlements. Their decisions on working capital management involve short-term assets of the corporation, such as inventory, cash, and debtors. In most situation financial accounting of the firm overlaps with financial management,

The main purpose of this report is to focus the positive accounting theory “Towards a Positive Theory of the Determination of Accounting Standards” and written by (Watts & Zimmerman, 1978) Ross L. Watts and Jerold L. Zimmerman, who indicated with a number of significant research in order to describe and contribute positive accounting theory