The financial management is generally concerned with procurement, allocation and control of financial resources of a concern. whenever we run any business or any organisation the most typical thing is to manage and maintain the finance and financial issues but on the tiger hand managing finance gives a lot of benefits or we can say it have some objectives as well those objectives can be:
- To check regular and adequate supply of funds to the concern.
- To ensure adequate returns to the shareholders which will depend upon the earning capacity, market price of the share, expectations of the shareholders.
- To ensure optimum funds utilisation. Once the funds are procured, they should be utilised in maximum possible way at least cost.
- To ensure safety on investment, i.e, funds should be invested in safe ventures so that adequate rate of return can be achieved.
- To plan a sound capital structure-There should be sound and fair composition of capital so that a balance is maintained between debt and equity capital.
- There are two paramount objectives of the Financial Management: Profit maximization and Wealth maximization.
- Profit maximization as its name signifies refers that the profit of the firm should be increased while
- Wealth maximization, aims at accelerating the worth of the entity.
- As a matter of fact, the objective of wealth management shall be given priority because
- The process through which the company is capable of increasing earning capacity known as Profit maximization while, the ability of the company in increasing the value of its stock in the market is known as wealth maximization.
- Profit maximization is a short-term objective of the firm while the long-term objective is Wealth maximization.
- Profit maximization ignores risk and uncertainty. Unlike Wealth maximization, which considers both.
- Profit maximization avoids time value of money, but Wealth maximization recognises it.
- Profit maximization is necessary for the survival and growth of the enterprise. Conversely, Wealth maximization accelerates the growth rate of the enterprise and aims at attaining the maximum market share of the economy.
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