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Scope of Financial Management

SCOPE OF FINANCIAL MANAGEMENT:

Financial management is one of the important parts of overall management, which is directly related with various functional departments like personnel, marketing and production. Financial management covers wide area with multidimensional approaches.

The following are the important scope of financial management.

1. Financial Management and Economics:

Economic concepts like micro and macroeconomics are directly applied with the
financial management approaches. Investment decisions, micro and macro
environmental factors are closely associated with the functions of financial manager.
Financial management 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.

Scope of Financial Management
[Post Image Courtesy of Panpote at FreeDigitalPhotos.net]

2. Financial Management and Accounting:

Accounting records includes the financial information of the business concern.
Hence, we can easily understand the relationship between the financial management
and accounting. In the olden periods, both financial management 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 nowaday’s financial management and accounting discipline are
separate and interrelated.

3. Financial Management or Mathematics:

Modern approaches of the financial management 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,
present 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 financial management.

4. Financial Management 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. Production performance 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 department.
The financial manager must be aware of the operational process and finance
required for each process of production activities.

5. Financial Management 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 financial management
are interrelated and depends on each other.

6. Financial Management and Human Resource:

Financial management 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, financial management is directly
related with human resource management.

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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