Download Financial Planning, Control, and Decision Making and more Study Guides, Projects, Research Financial Management in PDF only on Docsity! 1. FINANCIAL PLANNING THE ACT OF IDENTIFYING AND MANAGING FINANCIAL GOALS, ASSESSING ONE'S EXISTING FINANCIAL CONDITION, AND DEVELOPING AN ALL-ENCOMPASSING PLAN TO ACCOMPLISH THOSE GOALS IS KNOWN AS FINANCIAL PLANNING. IT ENTAILS DETERMINING HOW YOU WILL USE YOUR RESOURCES TO ACHIEVE BOTH SHORT- TERM AND LONG-TERM FINANCIAL GOALS AFTER EVALUATING YOUR INCOME, EXPENSES, ASSETS, AND LIABILITIES. BUDGETING, SAVING, INVESTING, RETIREMENT PLANNING, TAX REDUCTION, INSURANCE, ESTATE PREPARATION, AND DEBT MANAGEMENT ARE ALL COMMON COMPONENTS OF FINANCIAL PLANNING. THE CHIEF FINANCIAL OFFICER (CFO), WHO IS IN CHARGE OF FINANCIAL MANAGEMENT, WILL NEED TO ESTABLISH STRATEGIES TO ENSURE THAT THERE IS ADEQUATE MONEY AVAILABLE AT THE RIGHT TIME IN ORDER TO MEET THE ORGANIZATION'S SHORT-, MEDIUM-, AND LONG-TERM CAPITAL DEMANDS. THE REQUIREMENT FOR MONEY MIGHT MATERIALIZE SOON. 2. FINANCIAL CONTROL IN ORDER TO ENSURE THAT AN ORGANIZATION'S FINANCIAL GOALS AND OBJECTIVES ARE REALIZED, FINANCIAL CONTROL REFERS TO THE PROCESS OF CONTROLLING AND MONITORING ITS FINANCIAL RESOURCES. TO TRACK, EVALUATE, AND CONTROL AN ORGANIZATION'S FINANCES, SYSTEMS, PROCESSES, AND PROCEDURES MUST BE ESTABLISHED. FOR THE OPTIMAL USE OF RESOURCES, THE PREVENTION OF FINANCIAL FRAUD AND MISMANAGEMENT, AND THE ABILITY TO MAKE WISE FINANCIAL DECISIONS, FINANCIAL CONTROL IS CRUCIAL. THUS AFTER FUNDING HAS BEEN ESTABLISHED, THE CFO'S CONTROL ROLE IS CRUCIAL. THE CFO MUST EXAMINE QUESTIONS LIKE: DO THE ORGANIZATION'S VARIOUS ACTIVITIES ACHIEVE ITS OBJECTIVES? HOW WELL ARE RESOURCES BEING USED? TO RESPOND TO THESE QUESTIONS, THE CFO MAY COMPARE DATA ON ACTUAL PERFORMANCE WITH EXPECTED PERFORMANCE 3. FINANCIAL DECISION A FINANCIAL DECISION IS A CHOICE OR ACTION MADE BY A PERSON, A COMPANY, OR AN ORGANIZATION THAT INVOLVES ALLOCATING MONEY TO THE ACCOMPLISHMENT OF PARTICULAR GOALS OR OBJECTIVES. THESE CHOICES MAY HAVE AN IMPACT ON A NUMBER OF FINANCIAL MATTERS, SUCH AS INVESTMENTS, FINANCING, BUDGETING, AND RISK MANAGEMENT. IN ORDER TO MAXIMIZE PROFITS, MINIMIZE RISKS, AND ULTIMATELY CONTRIBUTE TO OVERALL FINANCIAL WELL-BEING, FINANCIAL DECISIONS ARE MADE WITH THESE GOALS IN MIND. TODAY, LOANS, DIVIDENDS, AND INVESTMENTS ARE THE THREE FUNDAMENTAL OPTIONS IN FINANCIAL MANAGEMENT. INVESTMENTS IN BOTH CURRENT AND FIXED ASSETS MUST BE PLANNED. FINANCIAL MANAGEMENT ALSO ENCOMPASSES THE FINANCING AND ADMINISTRATION OF BOTH SHORT- AND LONG-TERM FUNDS. IMPORTANTCE FOR A VARIETY OF STAKEHOLDERS WITHIN A COMPANY AND IN ITS INTERACTIONS WITH OUTSIDE PARTIES, FINANCIAL MANAGEMENT IS CRUCIAL. THE SIGNIFICANCE OF IT FOR EACH OF THE AFOREMENTIONED STAKEHOLDERS IS BROKEN DOWN AS FOLLOWS: 1. INVESTORS: FOR INVESTORS, FINANCIAL MANAGEMENT IS ESSENTIAL SINCE IT AFFECTS THE SUCCESS AND WORTH OF THEIR INVESTMENTS. EFFECTIVE FINANCIAL MANAGEMENT CAN RESULT IN INCREASED DIVIDENDS AND SHARE PRICES, ENHANCING SHAREHOLDER WEALTH. THEY RELY ON FINANCIAL REPORTS AND PERFORMANCE METRICS TO ANALYZE THE COMPANY'S HEALTH AND MAKE INVESTMENT DECISIONS. 2. CREDITORS: IN ORDER TO DETERMINE THE CREDITWORTHINESS OF AN ORGANIZATION, LENDERS SUCH AS BANKS AND CREDITORS RELY ON FINANCIAL MANAGEMENT. IT ASSISTS THEM IN DETERMINING THE LOAN'S RISK AND SETTING THE APPROPRIATE INTEREST RATE. EFFECTIVE FINANCIAL MANAGEMENT GUARANTEES TIMELY DEBT REPAYMENT AND UPHOLDS A GOOD REPUTATION WITH LENDERS, PERHAPS ENHANCING FUTURE ACCESS TO LOANS. 3. WORKERS: EMPLOYEES GAIN FROM SOUND FINANCIAL MANAGEMENT SINCE IT HELPS THE BUSINESS REMAIN STABLE AND EXPAND. A COMPANY'S CAPACITY TO PAY COMPETITIVE SALARIES, PERKS, AND BONUSES TO EMPLOYEES ALSO DEPENDS ON ITS ABILITY TO MANAGE ITS FINANCES EFFECTIVELY, WHICH CAN RESULT IN JOB SECURITY AND POSSIBILITIES FOR CAREER PROGRESSION. 4. CLIENTS: CLIENTS RECEIVE INDIRECT BENEFITS FROM SOUND FINANCIAL MANAGEMENT IN THE FORM OF RELIABLE GOODS AND SERVICES. OFFERINGS THAT ARE DEPENDABLE AND OF HIGH QUALITY CAN BE PRODUCED BY FINANCIAL STABILITY AND EFFICIENT MANAGEMENT. FINANCIAL CHOICES LIKE PRICING STRATEGIES AND SUPPLY CHAIN MANAGEMENT HAVE AN IMPACT ON THE CAPACITY TO MAINTAIN STABLE PRICES AND SATISFY CLIENT EXPECTATIONS. 5. PUBLIC: IN TERMS OF CONSUMER PROTECTION AND CORPORATE SOCIAL RESPONSIBILITY, FINANCIAL MANAGEMENT MAY HAVE AN IMPACT ON THE BROADER PUBLIC. COMPANIES WITH SOUND FINANCIAL MANAGEMENT ARE MORE LIKELY TO UPHOLD THEIR SOCIAL DUTIES.
