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 –
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
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.
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.
Tags : Financial Management - Finance – An Introduction
Last 30 days 15738 views