Financial management involves planning, utilizing, and controlling an organization's financial resources to achieve its goals. It includes estimating funding needs, choosing sources of finance like shareholders, debentures, banks, and investments, and managing cash flow. The finance department is also responsible for allocating surplus funds through dividends, bonuses, or reinvestment, and ensuring financial performance through controls. Sources of industrial finance include shares, public deposits, bank loans, development banks, and trade credit. Financial functions center around increasing and regulating fund inflows and outflows, utilizing funds effectively, coordinating finances, providing financial updates, and maintaining liquidity and control.

1. Financial Management

2. Financial Management
 Financial management can be described as the
planning, utilisation and controlling the financial
resources of an organisation to achieve the goals
of an enterprise.

3. Scope of Financial Management
 Estimating the Requirement of Funds
The finance department must estimate the capital
requirements of the firm accurately for long term and
short term needs.
 Choice of Sources of Finance
A company can raise funds from different sources e.g.
shareholders, debenture holders, banks, financial
institutions, public deposits etc.
 Investment of Funds
The funds raised from different sources should be
prudently invested in various assets -short term as
well as long term to optimize the return on
investment.
 Management of Cash
It is the prime responsibility of the finance manager to
see that an adequate supply of cash is available at

4. Scope of Financial Management
 Disposal of Surplus
One of the prime function of the finance department
is to allocate the surplus. After paying all taxes, the
available surplus of the business can be allocated for
three purposes –
(a) for paying dividend to the shareholders as a return
on their investment,
(b) for distributing bonus to workmen and
(c) for ploughing back of profits for the expansion of
business.
 Financial Controls
The financial manager is under an obligation to check
the financial performance of the funds invested in the

5. Sources of Industrial Finance
 Shares : A large part of fixed investments comes
from different types of shares.
 Public Deposits: In some parts of the country a
system of public deposits prevails. Under this system,
people keep their money as deposit with these
companies for a period of six months or a year.
Depositors receive a fixed interest. They can demand
the refund of money at any time. This money is used
by the companies to meet their needs of working
capital. But this source of finance is unreliable
because depositors can seek refund at any time.
With the growth of banking habits and increase in
dealings with financial institutions, the importance of
public deposits as a source of finance is slowly

6. Sources of Industrial Finance
 Loans from Banks: Commercial banks can provide funds for
working capital. Loans are given against the guarantee of
securities with companies.
 New Institutions for Industrial Finance: These institutions may
be grouped under the broad heading of development banks.
Established with the help of the Government to fill in the gaps in
industrial finance and to promote the objectives of planning, these
institutions cater to the needs of large and small industries. The
new institutions supplying industrial finance are SFC, IDBI etc. or
 ( Investment Institutions that play a pivotal role in the financial
markets. Also known as "financial instruments", the financial
institutions assist in the proper allocation of resources, sourcing
from businesses that have a surplus and distributing to others who
have deficits - this also assists with ensuring the continued
circulation of money in the economy. Possibly of greatest
significance, the financial institutions act as an intermediary
between borrowers and final lenders, providing safety and

7.  Trade Credit: It is the credit which the firms get
from its suppliers. It does not make available the
funds in cash, but it facilitates the purchase of
supplies without immediate payment. No interest
is payable on the trade credits.

8. Financial Functions
 Ensure regular increase in the inflow of fund into the
organisation.
 Regulate the outgoing of fund from the organisation.
 Regulate the effective utilisation of finance of the
organisation
 Coordinate with all other functions and department in
increasing revenue & reducing cost and expense.
 To participate in the decision making to make in time
availability of fund for different purposes
 Provide the correct picture of the financial position of the
organisation to the owners
 Maintain the liquidity position of the organisation.
 Maintain control over the financial activities of the
organisation.