Finance is defined as the provision of money at time when it is required. Finance plays a very important role for the successful of our business. Business is either big or small needs finance. As blood is necessary for the human being similarly finance is required for every business to run in successful way.Financial management is an area of financial decision making, harmonized individual motives and entrepreneurial goals.
Two types of finance:
Two types of finance:
- Public finance is those finance in which overall control by the government like Govt. institution, state government, central government, local government institution.
- Private finance: these are that finance in which are controlled by privately and no interference involved of government in private finance like personal finance, business finance, finance of non-profit organization.
Financial management is an area of financial decision making, harmonized individual motives and entrepreneurial goals.
Financial management is concerned with the proper utilization of funds. When proper utilization of funds then it is very helpful to the earn maximum profit in the funds. When use proper funds then various alternatives is finding to take the business. So that to take the final decision all the alternatives studied in detail.
Foreign companies (U.S.A co.’s) are more successful in the world. The main reason is that first of all proper utilization of funds and proper technique of the business. So that top most of the entrepreneur in the U.S.A companies.
Two objectives of the financial management:
- Profit maximation
- Wealth maximation
Profit maximation
Profit maximation is the main aim of the every businessman. No business can survive without the profit maximation. Risk is also the major factor of profit maximation. Higher risk then more profit and lower risk the low profit.
Disadvantages:
- It ignores the time value of money.
- It ignores the risk factor in business.
- Dividend policy does not affect the profit maximation.
- Different person thinks differently the value of money
For example: if the rich people earn Rs. 2000/ per day. Then they have no value. But when the poor people earn only 500 Rs. Per day they have the value of 500 RS. So we can say, profit is a vague and it is difficult to define in detail.
Wealth maximation:
Only profit not the essential part of the business. Wealth is also the major part of the successful of the business. Goodwill is the reputation of the business. It is very easy described the meaning but it is very difficult the meaning. For the successful of the business enterprise it is very necessary always good reputation in the market because to attract the customer goodwill plays a very important role for our business. For maintain goodwill in the market always best product launched in the market according to the customer satisfaction. Customer satisfaction is also necessary so that it is very necessary for the every entrepreneur always adopt the latest technology from the market.
