Importance of Financial Management

Finance is the key to successful business operations. Without proper administration of finance no business can succeed. The importance of management is discussed below:

1. Financial results help in the measurement of the performance of the firm. Risk and profitability are two main factors which determine the value of the concern. Financial decisions which increase the risk decrease the value of the firm whereas financial decisions which increase the profitability increase the value of the firm.

2. Financial management helps the management in taking financial decisions at different levels – whether it is top level, middle level or lower level.

3. Financial management is regarded as the focal point of decision making.

4. Most of the business promotions fail because of a defective business plan. Therefore for the success of every business enterprise a sound financial plan is very necessary.

5. Financial planning is also necessary for the smooth running of the business. It helps in generating profits for the business. It helps in obtaining funds at minimum cost and ensure effective utilization of these funds.