Financial management

<h2 id="role">Role</h2>
<p class="note">Further information: <a href="/facts/Financial_analyst/mlBpFFja">Financial analyst  § Financial planning and analysis</a></p>
<p class="note">See also: <a href="/facts/Managerial_finance/jkc1DKNU">Managerial finance</a>, <a href="/facts/Financial_risk_management/sXAcYTh9">Financial risk management § Corporate finance</a>, <a href="/facts/Financial_modeling/Qhk0pV2W">Financial modeling  § Accounting</a>, and <a href="/facts/Finance/fLh1GgN8">Finance § Corporate finance</a></p>
<p>Financial management is generally concerned with short term <a href="/facts/Working_capital_management/ugQCsFBQ">working capital management</a>, focusing on <a href="/facts/Current_assets/qAjDD4jF">current assets</a> and <a href="/facts/Current_liabilities/rRY1I5zQ">current liabilities</a>,  and <a href="/facts/Corporate_finance/ugQCsFBQ">managing fluctuations</a> in foreign currency and product cycles, often through <a href="/facts/Hedge_(finance)/PKVBgUHb">hedging</a>.
The function also entails the efficient and effective day-to-day management of funds, and thus overlaps <a href="/facts/Treasury_management/UfHE2CrN">treasury management</a>.
It is also involved with long term  <a href="/facts/Strategic_financial_management/bFTztNqI">strategic financial management</a>, focused on i.a. <a href="/facts/Capital_structure/QvaskVso">capital structure</a> management, including capital raising, <a href="/facts/Capital_budgeting/YRvRMxu7">capital budgeting</a> (capital allocation between business units or products), and <a href="/facts/Dividend_policy/cFTFoY9I">dividend policy</a>;
these latter, in large corporates, being more the domain of "<a href="/facts/Corporate_finance/ugQCsFBQ">corporate finance</a>."
</p><p>Specific tasks:
</p>
<ul><li><a href="/facts/Profit_maximization/CMCXTAHC">Profit maximization</a> happens when <a href="/facts/Marginal_cost/fcKjM5Mr">marginal cost</a> is equal to <a href="/facts/Marginal_revenue/TUl749d7">marginal revenue</a>. This is the main objective of financial management.</li>
<li>Maintaining proper <a href="/facts/Cash_flow/TM2tHnlW">cash flow</a> is a short run objective of financial management. It is necessary for operations to pay the day-to-day expenses e.g. raw material, electricity bills, wages, rent etc. A good cash flow ensures the survival of company; see <a href="/facts/Cashflow_forecast/FjsuvRYK">cashflow forecast</a>.</li>
<li>Minimization on <a href="/facts/Capital_cost/elIJ6yg3">capital cost</a> in financial management can help operations gain more profit.</li>
<li>Estimating the requirement of funds:<a class="footnote-ref" id="fnref:3" href="#fn:3"><sup>3</sup></a> Businesses make forecast on funds needed in both short run and long run, hence, they can improve the efficiency of <a href="/facts/Funding/RKTAE7sC">funding</a>. The estimation is based on the <a href="/facts/Corporate_budget/5wR3hBvM">budget</a> e.g. <a href="/facts/Sales_budget/5wR3hBvM">sales budget</a>, <a href="/facts/Production_budget/bGw6Myl7">production budget</a>; see <a href="/facts/Budget_analyst/5wR3hBvM">budget analyst</a>.</li>
<li>Determining the <a href="/facts/Capital_structure/QvaskVso">capital structure</a>: Capital structure is how a firm finances its overall operations and growth by using different sources of funds. Once the requirement of funds has estimated, the financial manager should decide the mix of debt and equity and also types of debt.</li></ul>
<h2 id="relationship-with-other-areas-of-finance">Relationship with other areas of finance</h2>
<p>Two areas of finance directly overlap financial management:
(i) <a href="/facts/Managerial_finance/jkc1DKNU">Managerial finance</a> is the (academic) branch of finance concerned with the managerial application of financial techniques;
(ii) <a href="/facts/Corporate_finance/ugQCsFBQ">Corporate finance</a> is mainly concerned with the longer term capital budgeting, and typically is more relevant to large corporations.
</p><p><a href="/facts/Investment_management/DqdgDv2m">Investment management</a>, also related, is the professional <a href="/facts/Asset_management/LR50A8E0">asset management</a> of various <a href="/facts/Security_(finance)/lJRYHKgD">securities</a> (shares, bonds and other securities/assets).
In the context of financial management, the function sits with treasury; usually the management of the various short-term financial <a href="/facts/Legal_instrument/SvqkPNcM">legal instruments</a> (contractual duties, obligations, or rights) appropriate to the company's <a href="/facts/Cash_management/eLzAaqLI">cash-</a> and <a href="/facts/Liquidity_risk/6eVYQWTx">liquidity management</a> requirements. See <a href="/facts/Treasury_management/UfHE2CrN">Treasury management § Functions</a>.
</p><p>The term "financial management" refers to a company's financial strategy, while <a href="/facts/Personal_finance/yD8qBCaU">personal finance</a> or <a href="/facts/Financial_life_management/h0RwN9Rd">financial life management</a> refers to an individual's management strategy. A <a href="/facts/Financial_planner/496GP9px">financial planner</a>, or personal financial planner, is a professional who prepares financial plans here.
</p>
<h2 id="financial-management-systems">Financial management systems</h2>
<p>Financial management systems are the <a href="/facts/Business_software/wjJ6Gm4G">software and technology</a> used by organizations to connect, store, and report on assets, income, and expenses.<a class="footnote-ref" id="fnref:4" href="#fn:4"><sup>4</sup></a>
See <a href="/facts/Financial_modeling/Qhk0pV2W">Financial modeling § Accounting</a> and <a href="/facts/Financial_planning_and_analysis/agX3GqW6">Financial planning and analysis</a> for discussion.
</p><p>The discipline relies on a range of products, from <a href="/facts/Spreadsheet/0cvc1GeB">spreadsheets</a> (invariably as a starting point, and frequently in total<a class="footnote-ref" id="fnref:5" href="#fn:5"><sup>5</sup></a>) through commercial <a href="/facts/Enterprise_performance_management/TEMX2gua">EPM</a> and <a href="/facts/Business_intelligence/ftThn7Wf">BI</a> tools, often <a href="/facts/BusinessObjects/HA9aKr02">BusinessObjects</a> (<a href="/facts/SAP/cxdgQYP8">SAP</a>), <a href="/facts/Oracle_Business_Intelligence_Suite_Enterprise_Edition/37EQJMc1">OBI EE</a> (<a href="/facts/Oracle_Corporation/0z14FygH">Oracle</a>), <a href="/facts/Cognos/a43DtVVr">Cognos</a> (<a href="/facts/IBM/QszA7nwd">IBM</a>), and <a href="/facts/Power_BI/xqJUmU2w">Power BI</a> (<a href="/facts/Microsoft/nGIDDXdx">Microsoft</a>).
Specialised <a href="/facts/FP%2526A/agX3GqW6">FP&A</a> products are provided by <a href="/facts/Jedox/Vn0QrIcz">Jedox</a>, <a href="/facts/Anaplan/h18zQglv">Anaplan</a>, <a href="/facts/Workday%2c_Inc./crJUeswK">Workday</a>, <a href="/facts/Hyperion_Solutions/prmIln5M">Hyperion</a>, <a href="/facts/Wolters_Kluwer/dlp5j9Jr">Wolters Kluwer</a>, <a href="/facts/Datarails/HcNtLwxm">Datarails</a>, and <a href="/facts/Workiva/3mlMUYYs">Workiva</a>.
</p>
<h2 id="see-also">See also</h2>
<ul><li><a href="/facts/Financial_management_for_IT_services/unKSf6rk">Financial management for IT services</a>, financial management of IT assets and resources</li>
<li><a href="/facts/Financial_Management_Service/h08098tD">Financial Management Service</a>, a bureau of the U.S. Treasury which provides financial services for the government.</li>
<li><a href="/facts/Financial_mismanagement/xXQJIywU">Financial mismanagement</a></li>
<li><a href="/facts/Financial_risk_management/sXAcYTh9">Financial risk management § Corporate finance</a></li>
<li><a href="/facts/FP%2526A/agX3GqW6">FP&A</a></li>
<li><a href="/facts/Managerial_finance/jkc1DKNU">Managerial finance</a></li></ul>

Wikiquote has quotations related to <i>Financial management</i>.

<h2 id="further-reading">Further reading</h2>
<ul><li>Lawrence Gitman and Chad J. Zutter  (2019). <i>Principles of Managerial Finance</i>, 14th edition, Addison-Wesley Publishing, <a href="/facts/ISBN_(identifier)/15AdSPa9">ISBN</a> 978-0133507690.</li>
<li>Clive Marsh (2009). <i>Mastering Financial Management</i>, Financial Times Prentice Hall <a href="/facts/ISBN_(identifier)/15AdSPa9">ISBN</a> 978-0-273-72454-4</li>
<li>James Van Horne and John Wachowicz (2009). <i>Fundamentals of Financial Management</i>, 13th ed., Pearson Education Limited. <a href="/facts/ISBN_(identifier)/15AdSPa9">ISBN</a> 9705614229</li></ul>

<h2 id="references">References</h2>

<ol>
<li id="fn:1"><p>"Financial Management". Kaplan Financial. <a href="https://kfknowledgebank.kaplan.co.uk/financial-management" target="_blank">https://kfknowledgebank.kaplan.co.uk/financial-management</a> <a href="#fnref:1" class="footnote-back-ref">↩</a></p></li>
<li id="fn:2"><p>Financial Managers, Bureau of Labor Statistics <a href="https://www.bls.gov/OOH/management/financial-managers.htm#tab-2" target="_blank">https://www.bls.gov/OOH/management/financial-managers.htm#tab-2</a> <a href="#fnref:2" class="footnote-back-ref">↩</a></p></li>
<li id="fn:3"><p>Budget Analysts, Bureau of Labor Statistics <a href="https://www.bls.gov/ooh/business-and-financial/budget-analysts.htm#tab-2" target="_blank">https://www.bls.gov/ooh/business-and-financial/budget-analysts.htm#tab-2</a> <a href="#fnref:3" class="footnote-back-ref">↩</a></p></li>
<li id="fn:4"><p>"Definition of Financial Management System (FMS) - Gartner Finance Glossary". Gartner. Retrieved 2022-01-06. <a href="https://www.gartner.com/en/finance/glossary/financial-management-system-fms-" target="_blank">https://www.gartner.com/en/finance/glossary/financial-management-system-fms-</a> <a href="#fnref:4" class="footnote-back-ref">↩</a></p></li>
<li id="fn:5"><p>Jeremy Fabbri (2020). Should You Use Spreadsheets for Risk Management? <a href="https://web.archive.org/web/20201126214125/https://riskwatch.com/2020/11/05/should-you-use-spreadsheets-for-risk-management/" target="_blank">https://web.archive.org/web/20201126214125/https://riskwatch.com/2020/11/05/should-you-use-spreadsheets-for-risk-management/</a> <a href="#fnref:5" class="footnote-back-ref">↩</a></p></li>
</ol>

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Financial management