Relationship of Financial Management with Other Areas

Relationship of Financial Management with Other Areas

financial management is interrelated with other areas. The relation between Financial management with other areas can be defined as follow:

#1. FM and Economics
Economic concept like micro and macro economics re directly applied with the FM approaches. Investment decisions, micro and macro environmental factors are closely associated with the functions of financial manager. FM also uses the economic equations like money value discount factor, economic order quantity etc. financial economics is one of the emerging area, which provides immense opportunities to finance and economical areas.

#2. FM and Accounting
Accounting records includes the financial information of the business concern. Hence, we can easily understand the relationship between the FM and accounting. In the olden periods both FM and accounting are treated as a same discipline and then it has been merged as management accounting because this part is very much helpful to finance manager to take decisions. But nowadays FM and Accounting discipline are separate and interrelated.

#3. FM and Production Management
Production management is the operational part of the business concern, which helps to multiple the money into profit. Profit of the concern depends upon the production performance. It needs finance because production department requires raw material, machinery, wages, operating expenses etc. these expenditures are decided and estimated by the financial department and the finance manager allocates the appropriate finance to production.

#4. FM and Human Resource
FM is also related with Human Resource department, which provides manpower to all the functional areas of the management. Financial manager should carefully evaluate the requirement of manpower to each department and allocate the finance to the Human Resource department as wages, salary, remuneration, commission, bonus, pension and other monetary benefits to the Human Resource department. Hence, FM is directly related with Human Resource management.

#5. FM and Marketing
Produced goods are sold in the market with innovative and modern approaches. For this, the marketing department needs finance to meet their requirements. The financial manager or finance department is responsible to allocate the adequate finance to the marketing department. Hence, marketing and FM are interrelated and depends on each other.

#6. FM and Mathematics

Modern approaches of the FM applied large number of mathematical and statistical tools and techniques. They are also Called as econometrics. Economic order quantity, discount factor, time value of money, cost of capital, capital structure theories, dividend theories, ratio analysis and working capital analysis are used as mathematical and statistical tools and techniques in the field of FM.

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