Financial management is both a science and an art. Its nature is nearer to applied sciences as it envisages use of classified and tested knowledge as a help in practical affairs and solving business.
Financial
Management as Science or Art
Financial management is both a
science and an art. Its nature is nearer to applied sciences as it envisages
use of classified and tested knowledge as a help in practical affairs and solving
business.
Theory of financial management is
based on certain systematic principles, some of which can be tested in
mathematical equations like the law of physics and chemistry. Financial
management contains a much larger body of rules or tendencies that hold true in
general and on the average. The use of computers, operations research,
statistical techniques and econometric models find wide application in
financial management as tools for solving corporate financial problems like
budgeting, choice of investments, acquisition or mergers etc. This takes the
financial management nearer to treatment as a subject of science.
Most practical problems of
finance have no hard and fast answers that can be worked out mathematically or
programmed on a computer. They must be solved by judgment, intuition and the “feel”
of experience. Thus, despite its frequent acceptance as an applied science,
finance remains largely an art. Because, according to George A. Christy and
Feyton Foster Roden (Finance: Environment and Decisions) knowledge of facts,
principles and concepts is necessary for making decisions but personal
involvement of the manager through his intuitive capacities and power of
judgment becomes essential. As the application of human judgement and skills is
also required for effective financial management, financial management is also
an art.
In the entire study of financial
management whether it is related to investment decisions, financing decisions
i.e. deciding about the sources of financing, or dividend decisions, there is a
mixture of science as well as art. When techniques for analytical purposes are
used, it is science and when choice is application of the results it is
an art.
Tags : Financial Management - Finance – An Introduction
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