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What exactly is financial management? Basically, it refers to the management of finances in a business, corporation or organization with the sole purpose to achieve particular financial objective. Among some of the most common financial objectives are to increase the organization's earning, focus on returning cash of shareholders and generate sufficient return on investment by taking into consideration the risks posed to the business.

   

To manage finances in corporation, there are three elements/stages in the process planning, controlling and decision-making. To begin with, financial planning is the most crucial stage as it will affect the outcome in end-stage. Before the experts plan some winning strategies or tactics, the management must ensure that the funding is sufficient to support the business. On top of that, it is advisable to set aside additional funding as a safety precaution. The funds are needed to buy stocks, settle salaries for employees and handle any business crisis. In certain cases, additional fund is needed to make acquisitions or expand the business. Therefore, management should plan accordingly by allocating sufficient funds before progressing to the next stage.

Next up, management must understand the importance of controlling the finances to ensure smooth progress of activity that will help elevate business to achieve the objectives. Generally, financial control must be able to address some of the most important issues such as security, efficient used of assets and execution of activities that will benefit the shareholders.

Finally, after planning accordingly on how to control the usage of finances in the business, it is the right time for decision-making in relation to investment and dividends. Most of the time, corporations or organizations prefer internal financing as it is more convenient when the management draft out activities according to existing budget. However, in other situations, alternative financing is also useful as it may eventually help in acquisition and business expansion.

Among some of the most common alternative financing are selling corporations' shares, borrowing from financial institutions and requesting credit from suppliers. At this stage, management must also determine if the profits and earnings of the business should be retained or divided evenly among shareholders.


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