All finance come at some cost it is quite imperative that it needs to be carefully managed financially. Management is concerned with the optimal requirement as well as the usage of finance for optimal procurement, different available sources of finance are identified and compared in term of their costs and associated risks. Similarly, the finance of procured need to be invested in a manner that the returns from the investment exceed. The cost at which the government has taken place financial management at reducing the cost of procuring. Keeping at the risk under control and achieving effective employment of such finds it also at insurance availability of element. Whenever required as well as avoiding idol finance needless to influences the future of a business dependent great deal on the quality of its financial management.
The role of financial management cannot be overemphasized it has a direct bearing on the financial health of a business. The financial statements such as balance sheet and profit and loss account reflect if forms financial position and its financial health almost all items in the financial statements of a business are affected directly or indirectly through some financial management decisions some prominent examples of the aspects been affected could be as under:
The size and the composition of fixed assets of a business, for example, a capital budgeting decision to invest a sum of 100 rupees crore in fixed assets food rates the size of fixed assets block by this amount.
The amount of long term and short term fund to be used financial management among other involved decision about the proportion of long term and short term funds.
The breakup of long term financing into debt-equity etc, of a total long term finance the proportions. To be raised by way of debt or equity is also financial management decisions. The amount of debt-equity share capital preference share capital is affected by the financial decision which is a part of financial management.