Financial management is generally concerned with short term
working capital management, focusing on
current assets and
current liabilities, and
managing fluctuations in foreign currency and product cycles, often through
hedging. The function also entails the efficient and effective day-to-day management of funds, and thus overlaps
treasury management. It is also involved with long term
strategic financial management, focused on i.a.
capital structure management, including capital raising,
capital budgeting (capital allocation between business units or products), and
dividend policy; these latter, in large corporates, being more the domain of "
corporate finance." Specific tasks: •
Profit maximization happens when
marginal cost is equal to
marginal revenue. This is the main objective of financial management. • Maintaining proper
cash flow is a short run objective of financial management. It is necessary for operations to pay the day-to-day expenses e.g. raw material, electricity bills, wages, rent etc. A good cash flow ensures the survival of company; see
cashflow forecast. • Minimization on
capital cost in financial management can help operations gain more profit. • Estimating the requirement of funds: Businesses make forecast on funds needed in both short run and long run, hence, they can improve the efficiency of
funding. The estimation is based on the
budget e.g.
sales budget,
production budget; see
budget analyst. • Determining the
capital structure: Capital structure is how a firm finances its overall operations and growth by using different sources of funds. Once the requirement of funds has been estimated, the financial manager should decide the mix of debt and equity, as well as the types of debt. ==Relationship with other areas of finance==