Nature, Purpose and Scope of

Financial Management
Chapter 1
Nature of Financial Management
• Financial Management
– Also referred to as managerial finance,
corporate finance and business finance, is a
decision making process concerned with
planning, acquiring and utilizing funds in a
manner that achieves the firm’s desired
goals.
Finance
• A body of facts, principles, and
theories relating to raising and using
money by individuals, businesses and
governments.
Goal of Financial Management
• To make money and add value
for the owners.

• To maximize the current value per

share of the existing stock or
ownership in a business firm.
Scope of Financial Management
• Procurement of short-term as well as long term
funds from financial institutions.

• Mobilization of funds through financial

instruments such as equity shares, preference
shares, debenture bonds, notes and so forth.

• Compliance with legal and regulatory provisions

relating to fund procurements.
Finance Manager is expected to analyze the
business firm and determine the following:

• The total funds requirement of the firm

• The assets or resources to be acquired; and

• The best pattern of financing the assets.

Types of Financial Decisions
• Investment Decisions

• Financing Decisions

• Dividend Decisions