Executive Too Routine Functions Of Fiscal Management

Functions of fiscal management

Functions of blogspot.com//search?q=what-is-financial-management-meaning">financial management tin hold out broadly divided into 2 groups:

blogspot.com//search?q=what-is-financial-management-meaning">management, and

Routine functions of fiscal management.

Following picture depicts viii executive functions of fiscal management.

blogspot.com//search?q=what-is-financial-management-meaning">capital requirements,

Determining working capital missive of the alphabet structure,

Estimating blogspot.com//search?q=what-is-financial-management-meaning">cash flow,

Investment decisions,

Allocation of surplus,

Deciding additional blogspot.com//search?q=what-is-financial-management-meaning">finance,

Negotiating for additional finance and

Checking the fiscal performance.

These executive functions of fiscal management (FM) are explained below.

Estimating working capital missive of the alphabet requirements : The companionship must gauge its working capital missive of the alphabet requirements (needs) real carefully. This must hold out done at the advertisement stage. The companionship must gauge its blogspot.com//search?q=what-is-financial-management-meaning">fixed capital needs as well as working working capital missive of the alphabet need. If not, the companionship volition conk over-capitalized or under-capitalized.
Determining working capital missive of the alphabet structure : Capital construction is the ratio betwixt owned working capital missive of the alphabet as well as borrowed capital. There must hold out a residual betwixt owned working capital missive of the alphabet as well as borrowed capital. If the companionship has likewise much owned capital, thence the shareholders volition teach fewer dividends. Whereas, if the companionship has likewise much of borrowed capital, it has to pay a lot of interest. It also has to repay the borrowed working capital missive of the alphabet afterwards about time. So the finance managers must develop a balanced working capital missive of the alphabet structure.
Estimating cash flow : Cash period of time refers to the cash which comes inwards as well as the cash which goes out of the blogspot.com//search?q=what-is-financial-management-meaning">business. The cash comes inwards by as well as large from sales. The cash goes out for job concern expenses. So, the finance managing director must gauge the futurity sales of the business. This is called Sales blogspot.com//search?q=what-is-financial-management-meaning">forecasting. He also has to gauge the futurity job concern expenses.
Investment Decisions : The job concern gets cash, mainly from sales. It also gets cash from other sources. It gets long-term cash from equity shares, debentures, term loans from fiscal institutions, etc. It gets short-term loans from banks, blogspot.com//search?q=what-is-financial-management-meaning">fixed deposits, dealer deposits, etc. The finance managing director must invest the cash properly. Long-term cash must hold out used for purchasing fixed assets. Short-term cash must hold out used every bit a working capital.
Allocation of surplus : Surplus agency profits earned past times the company. When the companionship has a surplus, it has iii options, viz.,
1. It tin pay dividend to shareholders.
2. It tin salvage the surplus. That is, it tin bring retained earnings.
3. It tin plough over bonus to the employees.
Deciding additional finance : Sometimes, a companionship needs additional finance for modernization, expansion, diversification, etc. The finance managing director has to arrive at upwardly one's take away heed on next questions.
1. When the additional finance volition hold out needed?
2. For how long volition this finance hold out needed?
3. From which sources to collect this finance?
4. How to repay this finance?
Additional finance tin hold out collected from shares, debentures, loans from fiscal institutions, fixed deposits from public, etc.
Negotiating for additional finance : The finance managing director has to negotiate for additional finance. That is, he has to utter to many banking concern managers. He has to persuade as well as convince them to plough over loans to his company. There are 2 types of loans, viz., short-term loans as well as long-term loans. It is tardily to teach short-term loans from banks. However, it is real hard to teach long-term loans.
Checking the fiscal performance : The finance managing director has to cheque the fiscal surgery of the company. This is a real of import finance function. It must hold out done regularly. This volition meliorate the fiscal surgery of the company. Investors volition invest their coin inwards the companionship entirely if the fiscal surgery is good. The finance managing director must compare the fiscal surgery of the companionship amongst the established standards. He must discovery ways for improving the fiscal surgery of the company.