Goal and Scope of Financial Management

Goals of Financial ManagementProfit Maximization:

Maximization of profits is very often considered as the main objective of a business enterprise. The objective of financial management is the same as the objective of a company which is to earn profit. The shareholders, the owners of the business, invest their funds in the business with the hope of getting higher dividend on their investment. Moreover, the profitability of the business is an indicator of the sound health of the organization, because, it safeguards the economic interests of various social groups which are directly or indirectly connected with the company e.g. shareholders, creditors and employees.

Goals of Financial ManagementWealth Maximization: The wealth maximization (also known as value maximization or Net Present Worth Maximization) is also universally accepted criterion for financial decision making. The value of an asset should be viewed in terms of benefits it can produce over the cost of capital investment.The value of a firm is represented by the market price of the company's stock. The market price ofa firm's stock represents the assessment of all market participants as to what the value of the particular firm is.

Scope of Financial ManagementProcurement of Short term and long term funds from financial institutions.

2. Mobilization of funds through financial instruments such as equity shares, preference shares, debentures shares, bonds, notes and so fourth.

3. Compliance with legal and regulatory provisions relating to funds procurement, use and distribution as well as coordination of the finance function with accounting function.