Week 1: Financial Management
Much of the analysis done by financial managers is based on numbers that are different from what would seem to be the corresponding numbers presented in the financial statements. This difference is not due to any kind of cooking the books or other attempts to mislead a...
Week 1: Financial Management
Much of the analysis done by financial managers is based on numbers that are different
from what would seem to be the corresponding numbers presented in the financial
statements. This difference is not due to any kind of cooking the books or other
attempts to mislead anyone. One example is the use of market value rather than
historical cost in the valuation of assets.
For your first post, define financial management. What are some other examples of the
differences between financial management and financial accounting? Give examples.
**For full credit reply to the prompt and to another student's response. You should have
two postings for your 20 points.
o Collapse SubdiscussionGwendolyn Bailey
Gwendolyn Bailey
Jan 4, 2021Jan 4 at 6:45pm
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Hi Professor and Class,
Financial management is much like Project Management. The methodologies are
aligned with strategic planning, organizing, directing, and controlling of the finances
in an organization. Financial management defines principles of the financial
organizational assets that is an important part in fiscal management.
Financial Management differs from Financial Accounting as follows:
Financial Accounting is basically the handling, measuring, preparing, classifying and
recording of monetary exchanges relating to a financial substance. It alludes to
summarize, analyze and record such data to be detailed to inner clients such as
administration, representatives and outside clients, such as financial specialists,
controllers, and the oversight agencies or assess officials. Financial Management is
additionally popularly known as commerce fund or corporate funds. Monetary
Administration may be a administrative action which is concerned with arranging,
coordinating, checking, organizing and controlling the financial assets of an
organization.
For example-Profit and Loss statement; A profit and loss statement, or income
statement, sums up a company's revenues, expenses and costs incurred over a
specific period. It shows a company's ability or inability to make a profit by increasing
revenues or reducing costs of operations. The profit and loss statement is the one
, report that usually receives the most attention – after all, the goal of every business
is to make a profit.
References
Ross, S. (2020, November 19). How Financial Accounting Differs from Managerial
Accounting. Retrieved from https://www.investopedia.com/ask/answers/041015/how-
does-financial-accounting-differ-managerial-accounting.asp
Edited by Gwendolyn Bailey on Jan 6 at 2:29pm
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Collapse SubdiscussionKimberly Freeland
Kimberly Freeland
Jan 9, 2021Jan 9 at 10:27pm
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Hi Gwendolyn,
Thanks for differentiating between financial management and accounting
management. I like your comparison of financial management to project
management because oversite, planning and organizing plays in both management
roles. As a small business owner, I have had to employ financial management
principles. My sons and I organized and started a small start up. We raised capital
on the family and friends level. Our accounting is managed by our CFO who has
both an educational and practice history in accounting. He handles all of the P&L
statements, taxes, and overall accounting practices.
Reply Reply to Comment
Collapse SubdiscussionGwendolyn Bailey
, Gwendolyn Bailey
Jan 10, 2021Jan 10 at 6:24pm
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Hi Kimberley,
Thank you for responding to my post.
Have a great week!
Reply Reply to Comment
o
Collapse SubdiscussionDevonte Stewart
Devonte Stewart
Jan 5, 2021Jan 5 at 1:59pm
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Hi Professor and Class,
Financial management is generally concerned with procurement, allocation, and
control of a concern's financial resources. The objectives can be-
1. To ensure a regular and adequate supply of funds to the concern.
2. To ensure adequate returns to the shareholders, the earning capacity, the market price of
the shareholders' share, and expectations will depend upon the earning capacity.
3. To ensure optimum funds utilization. Once the funds are procured, they should be utilized
in the maximum possible way at the least cost.
4. To ensure safety on investment, i.e., funds should be invested in safe ventures to achieve
an adequate return rate.
5. To plan a sound capital structure-There should be a sound and fair composition of capital
to balance debt and equity capital.
Functions of Financial Management
6. Estimation of capital requirements: A finance manager has to estimate the capital
requirements of the company. This will depend upon expected costs and profits and future
programs and policies of a concern. Estimations have to be made in an adequate manner,
which increases the earning capacity of an enterprise.
, 7. Determination of capital composition: Once the estimation has been made. The capital
structure has to be decided. This involves short- term and long- term debt equity analysis.
This will depend upon the proportion of equity capital a company possesses and additional
funds that have to be raised from outside parties.
8. Choice of sources of funds: For additional funds to be procured, a company has many
choices like-
1. Issue of shares and debentures
2. Loans to be taken from banks and financial institutions
3. Public deposits to be drawn in the form of bonds.
Choice of factor will depend on the relative merits and demerits of each source and
period of financing.
9. Investment of funds: The finance manager has to decide to allocate funds into profitable
ventures so that there is safety on investment and regular returns are possible.
10. Disposal of surplus: The net profits decision has to be made by the finance manager.
This can be done in two ways:
1. Dividend declaration - It includes identifying the rate of dividends and other benefits like
bonuses.
2. Retained profits - The volume has to be decided, depending upon its expansion,
innovational, and diversification plans.
11. Management of cash: The finance manager has to make decisions about cash
management. Cash is required for many purposes like payment of wages and salaries,
payment of electricity and water bills, payment to creditors, meeting current liabilities,
maintaining enough stock, purchasing raw materials, etc.
12. Financial controls: The finance manager has not only to plan, procure, and utilize the
funds, but he also has to exercise control over finances. This can be done through many
techniques like ratio analysis, financial forecasting, cost and profit control, etc.
Edited by Devonte Stewart on Jan 5 at 2pm
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Collapse SubdiscussionGwendolyn Bailey
Gwendolyn Bailey
Jan 7, 2021Jan 7 at 4:59am
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