Scope of Financial Management

Scope of Financial Management

Financial management is one of the important parts of overall management, which is directly related to various functional departments like personnel, marketing, and production.

Financial Management scpoes

Financial management covers a wide area with multidimensional approaches. The following are the important scope of financial management.

1. Financial Management and Economics: 

Economic concepts like micro and macroeconomics are directly applied with the financial management approaches. Investment decisions, micro, and macro-environmental factors are closely associated with the functions of the financial manager. Financial management also uses economic equations like money value discount factor, economic order quantity, etc. Financial economics is one of the emerging area, which provides immense opportunities to finance, and economic areas.

2.         Financial Management and Accounting:

Accounting records include the financial information of the business concern. Hence, we can easily understand the relationship between financial management and accounting. In the olden periods, both financial management and accounting are treated as the same discipline and then it has been merged as Management Accounting because of this part is very much helpful to the finance manager to take decisions. But nowadays financial management and accounting discipline are separate and interrelated.

3.  Financial Management or Mathematics:

Modern approaches to financial management applied a large number of mathematical and statistical tools and techniques. They are also called econometrics. Economic order quantity, discount factor, time value of money, present value of money, cost of capital, capital structure theories, dividend theories, ratio analysis and working capital analysis are used as mathematical and statistical tools and techniques in the field of financial management.

4. Financial Management and Production Management:

Production management is the operational part of the business concern, which helps to multiply the money into profit. Profit of the concern depends upon the production performance. Production performance needs finance, because the production department requires raw material, machinery, wages, operating expenses, etc. These expenditures are decided and estimated by the financial department and the finance manager allocates the appropriate finance to the production department. The financial manager must be aware of the operational process and finance required for each process of production activities.

5. Financial Management and Marketing:

Produced goods are sold in the market with innovative and modern approaches. For this, the marketing department needs finance to meet their requirements. The financial manager or finance department is responsible to allocate adequate finance to the marketing department. Hence, marketing and financial management are interrelated and depend on each other.

6. Financial Management and Human Resource:

Financial management is also related to human resource the department, which provides manpower to all the functional areas of the management. The financial manager should carefully evaluate the requirement of manpower to each department and allocate the finance to the human resource department as wages, salary, remuneration, commission, bonus, pension and other monetary benefits to the human resource department. Hence, financial management is directly related to human resource management.