Business Strategy

Objectives Of Financial Management

Over the last few years, Financial Management has published a significant number of articles that analyze patterns in returns. In this framework, the tools that management can employ range from ex ante expenditure controls to compliancy checks, inventory controls, record keeping, reporting, and monitoring (see figure 6.1).However, a contemporary internal control framework is more than a set of traditional financial and compliance controls.

A World Bank Consultant, Feridoun (2005) remarked that a familiar symptom of weak public financial management in developing countries, identified in the public finance development literature, is completed capital projects that lack the recurrent funds they need to function properly: hospitals that lack funding for medical staff and supplies; schools with no funding for teaching staff, supplies, and books; or roads with no funds in the government budget to maintain them.Finance Management

Each of these processes, including financial management itself, should incorporate subprocesses and techniques, including management, forecasting, strategic planning, planning and budgeting, procurement, disbursements, control, and communications (The African Development Bank Group’s Guidelines for Financial Management and Financial Analysis of Projects, 2002).

It is based upon a system of management information, financial regulations, and administrative procedures for assessing such activities as revenue collection, accounting, and procurement practices; policy- and decision-making processes; expenditure effectiveness; and human resources management.

It is a finance theory which suggests that management prefers to finance first from retained earnings, then with debt, followed by hybrid forms of finance such as convertible loans, and last of all by using externally issued equity; with bankruptcy costs, agency costs, and information asymmetries playing little role in affecting the capital structure policy.