Principles of Financial Management

Financial management

The conceptual nature of financial management is to consider it as a form of government funding of business activity, adequate market economy.
Financial management is based on three basic concepts:
1. The concept of present value, the content of which is an investment with a view to further increasing. That has obtained new capital to compensate initial investments, offset depreciation to inflation and to ensure increase of share capital - profit.
2. The concept of business risk arising from previous concepts as objectivity of the present value of future income forecast data depends on the accuracy of the forecast, the completeness of the information security training experts.
3. The concept of cash flow is to develop a policy of the company to attract financial resources of their movement, keeping them in a quality condition.
The financial manager should know how much money is needed to pay the debt, payment of dividends, when surplus cash or, conversely, their deficits, and depending on it to make financial decisions on placement of temporarily free funds or attract additional financial resources.
Concept of financial management are based on separation from the state budget budgets business. Necessary conditions for the effective functioning of financial management are:
• entrepreneurship;
• self-financing;
• market pricing;
• labor market;
• capital market;
• rehlamentovanist strict government regulation of business, based on a system of market laws.
Before we consider the principles of financial management, we should note two important aspects of its organization. First, financial management is not confined to the enterprise, and constantly interacts with the budget, off-budget funds, banks and insurance companies, institutional investors. Second, financial management under the influence of the general principles of management, planning, promotion, coordination of individual elements, variation, target orientation.
The basic principles of financial management include:
• systematic and planned character - the planning of material, labor and financial resources to ensure their balance, consistency in developing financing strategies and tactics in the implementation of planned activities;
• Task orientation - focus on the goals and objectives that are at the moment poses a company (increase profitability, productivity growth, create a positive image, innovation, strengthening the competitive position in the market, involving material and financial resources, and so on. Etc.). ;
• diversification of investments in two aspects: first, investing funds in various securities, investment projects; secondly, the creation of multi-enterprise engaged in various types of business;
• Strategic focus - focus on the long-term strategy of the enterprise, knowledge and consideration of strategic guidelines competitors, outstripping the financial management of the company;
• variability - different variants of forecasting the financial system of enterprise search and study of alternative financial solutions.