Financial management has become a dire necessity in today’s world. This is because societies have become more consumption -oriented. Amidst these developments managing all the finances becomes an ordeal. Individuals today have a large variety of commodities to choose from. Excessive spending results in high credit card bills. At the instances when consumers make transactions before they have the money in hand a fiscal crisis results. Thus at this very point it becomes imperative to circumvent this problem. Starting a new business is impossible without the knowledge of the subject that has come to be known as financial management. Important financial decisions such as what amount of money to invest, how to increase profit and managing long-run finances can only be made with the know how of financial management. Hence financial management can be defined as the process of making optimal decisions related to finances in order to achieve maximum increase in the shareholders assets/wealth. It is good to be aware of this before starting your business
In the 1970s there was no means by which a financial crisis could be averted. Instability and depression of financial activity was inevitable and a norm. In 1971, the gold standard ceased to exist and the world currencies were no longer tied to gold. This meant that interest rates and foreign exchange would remain unstable. Something needed to be done to ensure greater stability and thus many schools of thought emerged and we saw different theoretical frameworks develop that related to the management of finances. Much of the theories and principles were formulated in the 1980s and 1990s. Since then these theories and principals have been built upon and implemented. And in the 21st century the value of financial management as an academic subject has increased manifold.
In order to fully understand the process of financial management you need to be acquainted with three of its basic elements: Financial Planning, Financial Control and Financial decision making. Financial Planning entails making decisions related to the availability of funds for the short, medium and long term. Financial control relates to the effectiveness of wealth and assets. It overlooks the efficient allocation of funds and its proper utilization. Financial decision making entails decisions related to investment, financing and dividends. However financial management is not such a simplistic task comprising only of three elements. It incorporates many other activities. These include cash management, financial risk management, financial accounting, managerial accounting etc. Financial management also teaches you how to change your perception of money. This would involve controlling your spending behavior.
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If you are looking to work in a large corporation your best option would be to opt for a degree in financial management. You must study the program from a renowned university. If you already own a business you can opt for online courses in order to learn thee skills of financial management. This would make your business more profitable in addition to making your job a lot easier. You should also look for financial management software and use it in managing your daily financial activities.