Financial management refers to planning and controlling a firm's financial resources to procure funds from sources like equity, bonds, and loans and effectively utilize them to maximize profitability and owner wealth. The finance function aims to procure and use financial resources to maximize firm and shareholder value. It involves financial planning, raising funds, allocating funds, and financial control. Key decisions include investments, financing, and dividends, which are affected by factors like cash flow, return, risk, costs, market conditions, and earnings.

2. WHAT IS FINANCIAL MANAGEMENT ?
Financial management refers to that part of management activity which is
concerned with the planning and controlling of form’s financial resources.
It deals with the finding out various sources for raising funds for the firm.
The basic objective centers around:
 Procurement of funds from various sources like, Equity shares, Preference
shares, debentures, term loans and bonds.
 Effective utilisation of the funds to maximise the profitability of the firm and
wealth of its owners.

3. WHAT IS FINANCE FUNCTION ?
It is one of the main functions of a business organisation, which, aims at
procuring and judiciously utilising the financial resources with a view to
maximising the value of the firm thereby the value of the owners i.e.,
equity shareholders in a company is maximised.

4. Approaches to Finance Function
 Providing of funds needed by a business on most suitable terms (This
approach confines only to raising of funds)
 Second Approach relates finance function to cash. This approach implies that
finance function is related to every activity in the business
 Third approach to this function envisages the raising of funds and their
effective utilisation .
To conclude, finance function covers financial planning, raising of funds,
allocation of funds, financial control.

5. TYPES OF DECISIONS
 Investment decisions
 Financing Decisions
 Dividend decisions

6. FACTORS AFFECTING INVESTMENT
DECISIONS
 Cash flow of the project.
 Return on investment.
 Risk involved.
 Investment criteria.

7. FACTORS AFFECTING FINANCING
DECISIONS
 Cost
 Risk
 Cash flow position
 Control consideration
 Floatation cost
 Fixed operating cost
 State of capital market

8. FACTORS AFFECTING DIVIDEND DECISION
 Earning.
 Stability of earning.
 Cash flow position.
 Growth opportunities.
 Stability of dividend.
 Preference of shareholders.
 Taxation policy.