The financial management is usage of financial estimates which affect the financial condition in business of the
organizations. The financial management enables the organizations to plan, to use projects, future financial
realizations of capital, property and necessary stuff for maximization of the return of investments.
Financial planning is the first phase of financial management, which means management of total cash flows
which are needed in order to provide the necessary funds, to predict the overall inflow and outflow of funds, to
perform financial control not only on the current, but on the future financial and business events as well. The
financial planning in organizations is performed in order to predict future financial results and in order to
determine the company’s best way to use the financial resources for achievement of its short-term and long-term
goals.
The financial planning in the organization is a task which determines in which way the organization is going to
achieve its strategic goals. Usually, the organizations prepares financial plan after the establishment of the vision
and the goals that it would like to achieve by its operation. The financial planning determines which raw
materials are going to be procured, the products which are going to be produced, and the most efficient way to
sell them on the market. The financial planning impacts the human and material resources which are going to be
used in order to enable the company to run the business. The financial planning is essential determining factor
whether the company will be able to accomplish its business profitably.
Investment decisions – investments in basic assets (capital) and investments in current assets –
working capital,
Financial decisions - decisions relating the increase of funds from different sources, time of
financing, costs for the assets and the return of those assets,
Dividend decisions – allocation of net profit in two categories – dividends for shareholders and
remaining profit.
Generally, the financial management is related to procurement, allocation and control of financial resources. The
objective of financial management is:
o regular and appropriate provision of funds,
o to provide regular return to the shareholders, depending on the capacity of earning, market
price of the shares and shareholders’ expectations,
o to provide optimal usage of the funds. Since the assets are provided, they should be used
maximum with lowest costs,
o to provide investments security, that is to invest assets in secure undertakings and thereby to
provide appropriate rate of return,
o to plan the whole capital structure – to maintain balance between debts and capital value.
The financial management has function to estimate the requirements for capital which the company needs. That
depends on the expected costs and profit and future programs and policies. The capital estimation should be
performed in a way that will increase the company’s earning capacities. Once the assessment is made, the capital
structure in short-term and in long-term, as well as the borrowings and capital value should be determined. Then,
it is followed by the selection of assets sources, which may be shares and bonds, bank loans, loans from financial
institutions, public deposits in form of bonds. Financial management means to make decisions for allocation of
the assets in profitable undertakings and in secure investments with regular return of investment. Financial
management also includes making decision about cash management, payment of salaries, electricity costs,
repayment of loans, maintaining inventory, procurement of raw materials. The last activity of financial
management is financial control which may be realized through various techniques, such as relationship analysis,
financial forecasting and cost and profit control.
