The major roles, significance or importance of financial management can be highlighted as follows:
1. Proper Financial Planning
Financial management is related to wise and proper financial planning which includes:
- Determination of capital requirement
- Analyzing the possible sources of investment
- Finding out the most suitable, profitable and safe financing option.
2. Acquiring The Fund
It helps to select the best source of finance to acquire the fund required for the business.
3. Investment Decision
It helps the financial manager to make wise investment decision for selecting the most profitable venture with minimum risk and cost.
4. Effective Use Of Financial Resources
Financial management helps to use financial resources or funds properly and effectively to increase productivity and profitability of the business firm.
5. Increase Profitability And Value
Another importance of financial management is that it always focuses to increase profitability and value of the firm which promotes economic stability of the business.
6. Proper Allocation Of Profit
It helps to allocate the profit properly, which can be used for expansion purpose, dividend purpose or can be retained for future purpose.
7. Reporting
It produces different financial reports and provides information to the top management, shareholders, government and public which reflects the actual financial position of the business.
8. Helps In Decision Making
Financial management provides various information regarding investment, business operation, profitability etc. to the top level management. So, the management can make proper decision for future improvement.
