Objectives of Financial Management
Financial management aims to achieve various goals that ensure the smooth functioning and financial health of an organization. Here are some key objectives:
Profitability: While not the sole objective for all organizations, financial management certainly aims to maximize profits for businesses. This involves making decisions that increase revenue and control expenses.
Liquidity: Financial management ensures there's enough cash flow to meet short-term obligations and avoid financial difficulties. This involves managing current assets and liabilities effectively.
Solvency: This objective focuses on the long-term financial health of the organization. Financial management strikes a balance between debt and equity financing to ensure the company can meet its long-term debts.
Growth: Financial management plans for the growth of the organization. This involves making sound investment decisions and allocating resources efficiently to fuel expansion and achieve long-term goals.
Risk Management: Financial management identifies, assesses, and mitigates financial risks. This could involve protecting against unexpected events or fluctuations in the market.
Value Maximization: For shareholders, financial management focuses on maximizing the value of their investment in the company. This involves making decisions that increase the company's stock price.
These objectives are interrelated and financial managers constantly balance them to achieve optimal financial health for the organization.
