Archive | Financial Management

Financial Ratio Formulas | Accounting

Here is a list of some important financial ratio formulas. 1. Current Ratio = Current Assets/Current Liabilities 2. Net Working Capital Ratio = Net Working Capital/Net Assets 3. Quick Ratio = Quick Assets/Liquid Liabilities 4. Cash Position Ratio = (Cash + Marketable Securities)/ Liquid Liabilities 5. Proprietary Ratio = Shareholders’ Fund/ Total Asset (or) Total […]

Classification of Ratios | Accounting

In this article we will discuss about the classification of ratios in accounting. The accounting ratios may be classified on the following bases leading to somewhat overlapping categories: (A) Classification by Statements: The Traditional classification is based on those statements from which information is obtained for calculating the ratios. The ratios are classified as follows: […]

Limitations of Financial Statements | India | Accounting

In this article we will discuss about the limitations of financial statements of a company. Financial statements are based on historical costs and as such the impact of price level changes is completely ignored. They are interim reports. The basic nature of financial statements is historic. These statements are neither complete nor exact. They reflects […]

Tools of Financial Analysis | Company

In this article we will discuss about the three important tools of financial analysis. 1. Comparative Financial Statement: The preparation of comparative financial and operating statement is an important device of horizontal financial analysis. As their very name suggests, comparative financial statements are statements of the financial position of a business so designed as to […]

3 Main Approaches to Financial Management | Management

The following points highlight the three main approaches to financial management. The approaches are: 1. Traditional View 2. Modern View 3. Liquidity and Profitability. Approach # 1. Traditional View: Financial management is primarily concerned with acquisition, financing and management of assets of business concern in order to maximize the wealth of the firm for its […]

Reasons for Centralizing Finance Function

The argument in favour of centralizing the finance function is based on the following reasons:- 1. Strategic Decisions 2. Cash-Flow 3. External Orientation 4. Coordination 5. Financial Discipline 6. Information Flow. Reason # 1. Strategic Decisions: Many of the strategic decisions like setting up of financial goals, investment in capital projects, raising of finances through […]

Top 20 Functions of Financial Controller

The following points highlight top twenty functions of a financial controller in a large business. The functions are: 1. Provision of Capital 2. Investor Relations 3. Short-Term Financing 4. Banking and Custody 5. Credit and Collections 6. Insurance 7. Investments 8. Planning for Control 9. Reporting and Interpreting 10. Evaluating and Consulting 11. Tax Administration […]

3 Main Significance of Financial Management

The importance of financial management is known from the following aspects:- 1. Applicability 2. Chances of Failure 3. Return on Investment. Significance # 1. Applicability: The principle of finance is applicable wherever there is cash-flow. The concept of cash-flow is one of the central elements of financial analysis, planning, control and resource allocation decisions. Cash-flow […]

4 Main Financial Objectives of Business Firm

The following points highlight the four main objectives of business firm. The objectives are: 1. Profit Maximization Objective 2. Wealth Maximization Objective 3. Value Maximization Objective 4. Other Maximization Objectives. 1. Profit Maximization Objective: Profit as an objective has emerged from over a century of economic theory. In this traditional economic theory, the typical firm […]

Impact of Taxation and Inflation on Financial Management

In this article we will discuss about the impact of taxation on corporate financial management. Impact of Business Taxation: The tax payments represent a cash outflow from the business and therefore, these tax cash flows are critical part of the financial decision making in a business firm. In deed in some practical situations, the taxation […]

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