Nature of the Financial Management:
Following are the nature of Financial Management.
a) Easy Raising of Finance: Before procuring the necessary finance from various sources, a proper estimation is to be fixed as how much will be the number of cash flows of the organization for a specific period. The cash flow has two aspects, i.e., inflow and outflow. Accurate estimation is essential for the position of both cash inflows and cash outflows. After estimation the various sources from which necessary finance may be raised to be determined. At the same time, the cost of raising finance should be considered because the cost of capital is an influencing factor in determining the profitability of the concern.
b) Proper Utilisation of Collected Finance: After procurement of necessary finance from different sources, it is to be considered how the collected fund should be utilized at various levels of the organization. The collected fund should be properly and profitably used when the business will be able to satisfy its financial needs and the business can proceed towards future prosperity through a fair amount of profit earning. For this few factors should be considered i.e. cost control, price determination, possibility of future profit, and accounting of capital expenditure. To raise capital, the scale of expenditure should be under control. For cost control purposes, different techniques may be applied. While determining the price of goods, the cost of raising capital is required to be included in it. Because it is a part and parcel of the total cost of production. An account of estimation is required to be prepared after price determination to estimate the amount of future profit. Lastly, the different aspects of capital expenditure need to be considered.
c) Managerial Function: The financial manager allocates the collected funds among the different departments of the organization according to the respective needs and then takes decisions collectively with other managers so that the overall objectives are achieved and the organization with the creation of goodwill can be recognized as a remarkable institution. As the financial manager is a specialist in financial matters, he can render adequate advice to other levels of management. As such the financial manager performs the function of planning, organizing, directing, and controlling the business.