ROLE OF FINANCIAL MANAGEMENT

Financial management is the management of financial functions. Financial functions include begaimana obtain funds (raising of funds) and how to use these funds (allocation of funds). Financial managers are concerned with the determination of total assets worth of investments in various assets and choose the sources of funds to finance the asset. To obtain funds, financial managers can obtain it from within and outside the company. Sources from outside the company come from the capital market, may take the form of debt or equity capital.

Financial management can be defined from the duties and responsibilities of financial manager. The main task of financial management, among others, include decisions to invest, financing business activities and the distribution of dividends a company, thus the task of financial managers is to plan to maximize shareholder value. Another important activity that should be the financial manager concerning the four aspects:

1.      Financial managers must cooperate with other managers in charge of general planning company.

2.      Financial managers must focus on various investment and financing decisions, and other aspects related to

3.      Financial managers must cooperate with managers in the company so the company can operate as efficiently as possible

4.      Financial managers must be able to connect the company with the financial markets, where companies can obtain funds and corporate securities can be traded.

Another important aspect of corporate goals and objectives of financial management is the consideration of social responsibility that can be viewed from four aspects, namely:

1.      If financial management leads to memeksimalisasi stock price, it needs good management and efficient in accordance with consumer demand.

2.      Companies that managed to always put efficiency and innovation as a priority, resulting in new products, new technological discoveries and expanding employment

3.      External factors such as environmental pollution, product safety assurance and safety becomes more important to consider. Fluctuations in all levels of business activity and the changes that occur in conditions of financial markets is an important aspect of the external environment.

4.      Cooperation between industry and government is needed to create regulations governing corporate behavior, and vice versa companies comply with these regulations. Corporate purpose is essentially value of the company with technical considerations.

Basically, the purpose of financial management is to maximize corporate value. However, behind this goal is still there is a conflict between business owners with providers of funds as creditors. If the company running smoothly, then the value of the company’s stock will rise, while the value of corporate debt in the form of bonds is not affected at all. So it can be concluded that the value of stock ownership can be an appropriate index to measure the level of efektifitias company. Based on that reason, the financial management objectives expressed in terms of maximizing the value of shares of corporate ownership, or maximize stock prices. The purpose of maximizing the stock price does not mean that managers should attempt to seek capital appreciation of shares at the expense of bondholders.

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