What Are the Objectives of Financial Management? (2024)

FAQs

What Are the Objectives of Financial Management? ›

Objectives of Financial Management

The paramount objective of the financial management is maximising the shareholders' wealth. That is, the basic objective of financial management for a company is to opt for those financial decisions that prove gainful from the point of view of the shareholders.

There are six types of financial objectives: revenue objectives, cost objectives, profit objectives, cash flow objectives, investment objectives and capital structure objectives. Financial objectives can be set by both enterprises and individuals. These are called personal financial objectives.

Therefore, the goal of financial management is to maximise the current value per share of the existing stock. This avoids problems with previous goal and there is no short term vs long term issue.

Financial managers are responsible for the financial health of an organization. They create financial reports, direct investment activities, and develop plans for the long-term financial goals of their organization.

The main objective of financial accounting is to accurately prepare and record financial data to determine an organisation's actual performance. It must be remembered that financial accounting is not the same as cost or management accounting.

Cost, Revenue and Profit for Financial Goals

Businesses can use cost, revenue and profit objectives to set financial goals.

The three key factors that influence financial planning are asset allocation, tax planning, and estate planning. These factors are critical in optimizing investment growth, minimizing tax liabilities, and ensuring wealth is managed and transferred efficiently according to the individual's wishes.

Overall Objective [OG]

"The Overall Objective explains why the project is important to society, (also sometimes in terms of the longer-term benefits to final beneficiaries and the widerbenefits to other groups.

What are the basic objectives of financial management is Maximising of? ›

Wealth maximization (shareholders' value maximization) is also a main objective of financial management. Wealth maximization means to earn maximum wealth for the shareholders. So, the finance manager tries to give maximum dividend to the shareholders.

The goal of financial management is to maximize shareholder wealth. For public companies this is the stock price, and for private companies this is the market value of the owners' equity.

The purpose of strategic financial management is to identify the possible strategies capable of maximizing the organization's market value. Also, it ensures that the organization is following the plan efficiently to attain the desired short-term and long-term goals and maximize value for the shareholders.

Objectives of Financial Management

Maximizing profits: Provide insights on, for example, rising costs of raw materials that might trigger an increase in the cost of goods sold. Tracking liquidity and cash flow: Ensure the company has enough money on hand to meet its obligations.

Financial management is all about monitoring, controlling, protecting, and reporting on a company's financial resources. Companies have accountants or finance teams responsible for managing their finances, including all bank transactions, loans, debts, investments, and other sources of funding.

Answer and Explanation:

The four primary financial objectives of firms are; stability, liquidity, profitability, and efficiency. The profitability objective focuses on generating enough revenue to meet the firms' expenses and the desired profit margin.

Profit Maximization refers to increasing the company's profit, while Wealth Maximization aims to accelerate the entity's value. Profit maximization is the primary goal since profit is the measure of efficiency, while wealth maximization aims to increase stakeholder value.

The main objective of preparing the financial statement is to present a true and fair view of the financial performance and position. Accounting data is summarised in such a way that the profitability of the business is clearly visible. It also serves as an information tool for all the parties concerned with the firm.

A financial goal is a scientifically defined financial milestone that you plan to achieve or reach. Financial goals comprise earning, saving, investing and spending in proportions that match your short-term, medium-term or long-term plans.

The long run objective of financial management is to maximize the value of the firm's common stock. Q. What is the primary objective of 'Financial Management'?