Financial Management - Finance – An Introduction
Finance Function – Objectives
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The objective of finance function is to arrange as much funds for the business as are required from time to time. This function has the following objectives.
Finance Function –
Objectives
The objective of finance function is to arrange as much funds for the business as are required from time to time. This function has the following objectives.
The main objective of finance function is to assess the financial needs of an organization and then finding out suitable sources for raising them. The sources should be commensurate with the needs of the business. If funds are needed for longer periods then long-term sources like share capital, debentures, term loans may be explored.
Though raising of funds is important but their effective utilisation is more important. The funds should be used in such a way that maximum benefit is derived from them. The returns from their use should be more than their cost. It should be ensured that funds do not remain idle at any point of time. The funds committed to various operations should be effectively utilised. Those projects should be preferred which are beneficial to the business.
The planning and control of finance function aims at increasing profitability of the concern. It is true that money generates money. To increase profitability, sufficient funds will have to be invested. Finance function should be so planned that the concern neither suffers from inadequacy of funds nor wastes more funds than required. A proper
control should also be exercised so that scarce
resources are not frittered away on uneconomical operations. The cost of acquiring
funds also influences profitability of the business.
Finance function also aims at maximizing the value of the firm. It is generally said that a concern’s value is linked with its profitability.
The objective of finance function is to arrange as much funds for the business as are required from time to time. This function has the following objectives.
1. Assessing the Financial Requirements
The main objective of finance function is to assess the financial needs of an organization and then finding out suitable sources for raising them. The sources should be commensurate with the needs of the business. If funds are needed for longer periods then long-term sources like share capital, debentures, term loans may be explored.
2. Proper Utilisation of Funds
Though raising of funds is important but their effective utilisation is more important. The funds should be used in such a way that maximum benefit is derived from them. The returns from their use should be more than their cost. It should be ensured that funds do not remain idle at any point of time. The funds committed to various operations should be effectively utilised. Those projects should be preferred which are beneficial to the business.
3. Increasing Profitability
The planning and control of finance function aims at increasing profitability of the concern. It is true that money generates money. To increase profitability, sufficient funds will have to be invested. Finance function should be so planned that the concern neither suffers from inadequacy of funds nor wastes more funds than required. A proper
4. Maximising Value of Firm
Finance function also aims at maximizing the value of the firm. It is generally said that a concern’s value is linked with its profitability.
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