Goal and Scope of Financial Management Financial Management PCC BHS SY 2012-2013
Goals of FinancialManagementProfit Maximization:Maximization of profits is very often considered asthe main objective of a business enterprise.The objective of financial management is the same asthe objective of a company which is to earn profit.The shareholders, the owners of the business, investtheir funds in the business with the hope of gettinghigher dividend on their investment.Moreover, the profitability of the business is anindicator of the sound health of the organization,because, it safeguards the economic interests ofvarious social groups which are directly or indirectlyconnected with the company e.g. shareholders,creditors and employees.
Goals of FinancialManagementWealth Maximization:The wealth maximization (also known as valuemaximization or Net Present WorthMaximization) is also universally acceptedcriterion for financial decision making. Thevalue of an asset should be viewed in terms ofbenefits it can produce over the cost ofcapital investment.The value of a firm is represented by themarket price of the companys stock. Themarket price of a firms stock represents theassessment of all market participants as towhat the value of the particular firm is.
Scope of FinancialManagement1. Procurement of Short term and long term funds from financial institutions.2. Mobilization of funds through financial instruments such as equity shares, preference shares, debentures shares, bonds, notes and so fourth.3. Compliance with legal and regulatory provisions relating to funds procurement, use and distribution as well as coordination of the finance function with accounting function.