Financial management is gaining on strength as time goes by. Why you might ask, what is the role of financial management, that made financial management gain on importance in past few years. I will try to explain what is the role of financial management and I will try to explain why did financial management gain on its importance in recent years.
Many people confuse financial management and accounting. This is the biggest mistake one can make, syce financial management has nothing to do with accounting. The main role of financial management are of course finances. Financial management manages where the finances are coming from, how much they cost, where they are going to be invested and what profit should the bring.
As in other management roles, so is in this one. The most important thing is the growth of company, the profit making and making the owners/shareholders happy. It is actually an art, financial management is also very connected with risk judgement, since all investments involve risk and financial management needs to find the middle way between risk and profit.
Now why has financial management became so important recently? Because of the global economy and so many threats that are out there hovering over companies. Companies do not just “do what they do”. They cannot just make one product and sell it. Every day bigger part of companies portfolio are stocks or with other words investments. Companies try to lower the risk of their existence by investing in other fields of market. And because of that, even if they fail to sell their product as they used to, they still will have some income coming from dividends and capital gains in their stock investments.