Financial Management Scope: Financial Management involves a range of tasks for which financial managers are employed. The functions of a financial manager are myriad and may range from tackling the entire finances of a small company to a specialised financial operation in a large business. For instance, in a large business, the financial manager may look after cash flow management, not total finances.
Financial managers deal with the determination of quantity capital and the establishment of capital structure involving both short-term and long-term debt-equity analysis. Besides, a financial manager makes profitable investments to grow the company’s profits.
It is important to analyse major opportunities available in this sector to properly analyse financial management scope. We will know the major skills, types, and opportunities available in the stock market.
A financial manager also analyses the company’s finances via financial forecasting involving varied methods such as ratio analysis, horizontal and vertical analysis, etc. Let us understand the various career opportunities and the financial management scope in this article.
What is Financial Management?
Financial Management is a major business function concerned with expenses, cash, credit, and profitability.
All its subordinate functions are arranged together to draw as big profits as possible for the concerned company. Thus, being well-versed in financial management is a necessity for running a profitable business.
The most important objective of financial management is to maximize profits. Besides, financial management involves tracking cash flow and liquidity, earning capacity, expectations of shareholders, appropriate returns to the shareholders based on earning capacity, and value of shares in the market etc.
At all these levels, there is a scope to carve out a career for oneself in financial management;)
Financial Management Scope and Functions: Key Takeaways
- There are various objectives of financial management. Major ones include wealth and profit maximization, survival of the firm, capital cost minimization, estimation of funds, increased efficiency, and determination of capital structure.
- Financial managers are recruited to handle all the major financial functions of a firm and fulfill the above objectives. They make important decisions associated with dividends, investment, and financing.
- Financial managers are appointed as investors, portfolio administrators, public accountants, risk managers, bankers, etc.
What are the types of Financial Management decisions?
Financial Managers are in high demand in India as well as all over the world. This is because they make prominent financial decisions for a business. The major financial management decisions include:
- Dividend Decisions : Dividend Decisions are financial decisions that adhere to the allocation of dividends to the company’s shareholders. It decides how much dividend (profits) to keep for the company’s growth and how much to divide amongst the shareholders.
- Investment Decisions: Investment decisions deal with investments made by a company in various assets. These decisions can be long-term (Capital and budgeting decisions) or short-term (Working capital decisions). Long-term investment decisions involve capital and budgeting decisions for which cash flow analyses may be required. For instance, opening a new store out of the company’s funds. Short-term investment decisions involve day to day working of the company’s business.
- Financing Decisions: Financing decisions are more comprehensive and involve the total financial management of the company from financial analysis to financial forecasting. It incorporates the assessment of capital risks and economic costs, shareholder’s funds, borrowed capital, etc.
What are the major skills required for Financial Management?
A company requires several skills that a financial manager must have to attain as big profits as possible. You must be familiar with some of these skills.
- Strategic and Analytical abilities: For successful management of finances, a finance manager must have analytical and strategic abilities to determine market trends, make profitable investments, look after shareholders, manage cash inflow and outflow, and come up with prospective ways to make profits for the company.
- Adaptability: The financial market and industry are an ever-changing sea. In such a condition, a financial manager needs to be adaptable to market trends and industry needs. Whenever necessary, they must change their ways and come up with ideas to make profits even in turbulence.
- Leadership: Leadership is another essential skill in financial management. Most likely, financial managers lead a team of accountants and other financiers.
Financial Management Scope And Functions
Financial Management offers a range of career opportunities. We shall look into some of the most prominent ones:
1. Financial Risk Management
Financial Risk Managers are professionals competent in identifying market risks and prospective failures of a poor investment. Risk managers manage financial risk to deal with market and industrial uncertainties to protect the company’s finances.
There are three types of risks: Financial, Business, and Non-Business. Financial Risk Managers identify, assess, and manage all these risks to favour the company and make considerable gains without any losses.
2. Financial Advisor
A financial advisor is a professional financier. Financial advisors provide advice and suggestions according to their financial situation. They play a major role in the financial planning of a company and lay the path to the company’s success.
They advise on all financial parameters of the company including assets, investments, risks, strategic planning, budgeting, forecasting etc.
3. Financial Analyst
A financial analyst deals in financial market trends and suggests profitable assets to invest in. A company hires financial analysts to assess market trends and find favourable investment opportunities for the company.
4. Investment Banking
Investment banking is amongst the most prestigious financial opportunities. It is a financial service in which financial advice is adhered to by prominent investors like corporations, organizations, companies governments, etc.
The functions of an investment banker involve the assessment of transactions and the study of stocks and market trends to suggest profitable stocks to invest in for maximum profits and minimum costs.
5. Investment Management
Investment managers are professional asset managers. They deal in various securities such as bonds, shareholdings, and numerous other assets such as real estate, etc. to favour investors.
6. Working Capital Management
Working capital managers deal with the day-to-day work of the firm or organization. It involves monitoring and controlling all the short-term assets and liabilities of a company to facilitate smooth operations.
Working capital management is a quintessential part of financial management. The functions of a working capital manager incorporate the management of the day-to-day finances of a company which includes all cash, accounts payable, and accounts receivable.
7. Corporate Finance
Corporate financiers are financial managers who deal with the capital structures of business, their sources of funding, and actions of managers leading to alleviate firm value to the shareholders and the tools used to assign financial resources.
8. Accounting
Accounting, also called accountancy, is an essential part of financial management. It is the process of information processing and recording all economic entities of a company.
An accounting manager supervises the financial records of the company and looks after its day-to-day financial operations.
9. Equity Research Analyst
An equity research analyst or finance research analyst deals with the analytical study of equities and stocks in the market, tracking the growth of the company and looking into their performance.
10. Capital Budgeting
Capital Budgeting is a financial management service that involves predictions about operating expenses and all business transactions. It is the process of selecting capital expenditures or long-term investment opportunities.
Besides those mentioned, financial management offers several other financial scope and functions, such as profit manager, credit risk manager, wealth maximizer, and compliance department.
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Financial Management Scope FAQs
What is financial management?
Financial Management is the business function that monitors, controls, assesses, manages, and reports the total finances of a company. It is associated with the management of the cash inflow and outflow of a company. The main objectives of financial management are minimizing costs, maximising profits, making successful investments etc.
What are the 4 elements of financial management?
The four elements of financial management are:
Planning
Controlling
Organizing and Directing
Decision Making
What is the scope of financial management?
The scope of financial management revolves around making dividend decisions, investment decisions, and financing decisions. By making use of one or more of these, a successful career in financial management as an accountant, risk manager, investor, etc. can be built.
