Aims of Financial Management:
Reduce cost of funds procured
Keep risks under control
Achieve effective employment of fund
Ensure availability of sufficient funds while avoiding idle funds
objectives of Financial Management
Primary objective: To maximize wealth of owners in the long run – Wealth Maximization concept.
Owners’ of a company are the shareholders.
The term wealth refers to wealth of owners as reflected by the market price of their shares.
The market price of shares is linked to three basic financial decisions:
Investment decision • Financing decision and • Dividend decision
Market price of a share will increase if benefits from a decision are greater than the cost involved in it.
The goal of a firm should be to maximize the wealth of owners in the long run.
Increase in the market price of shares is an indicator of the financial health of a firm.
Other objectives that help a firm achieve the primary objective are:
Ensure availability of funds at reasonable costs:
Ensure effective utilization of funds:
Ensure safety of funds thro creation of reserves: Maintain liquidity and solvency: