Finance is the life blood and nerve centre of a business, just as circulation of blood is essential in the human body for maintaining life; Finance is very essential for smooth running of the business. It has been rightly termed as universal lubricant that keeps the firm dynamic. No business, whether big, medium or small, can be started without an adequate amount of finance. Right from the very beginning i.e ., conceiving an idea to business, Finance is needed to promote or establish the business, acquire fixed assets, make investigations such as market surveys etc.,

FINANCIAL MANAGEMENT

Financial management refers to the management of flow of funds in the firm. It deals with the financial Decision making of the firm. It is mainly concerned with the timely procurement of adequate finance from various sources and its utmost effective utilization for the attainment of organizational objectives. 

SCOPE OF FINANCIAL MANAGEMENT 

Traditional approach 

The Traditional approach to the scope of financial management refers to its subject matter in the academic literature in the initial stages of its evolution as a separate branch of study. According to this approach, the Scope of financial management is confined to the raising of funds.

MODERN APPROACH: 

After the 1950s ,the approach and utility of financial of financial management has been shifted from raising of funds to the effective and judicious utilization of funds. The modern approach of the finance function focuses on “wise use of funds”.

BASIC OBJECTIVES 

A. PROFIT MAXIMIZATION 

Profit maximization is one of the basic  objectives of financial management. According to this concept, a firm should undertake all those activities which add to its profits and eliminate all other which reduce its profits.

Profit is a yardstick of efficiency on the basis of which economic efficiency of a business can be evaluated.

It helps in efficiency allocation and utilization of scarce means because only such resources are applied which maximize the profits. 

B. WEALTH MAXIMIZATION 

Another basic objective of financial management is maximization of shareholders wealth. This objectives is also known as value maximization or net present-worth maximization. According  to this concept, Finance manager should take such decisions  which increases net present value of the firm and should not undertake any activity which decrease net present value.

PROFIT MAXIMIZATION Vs WEALTH MAXIMIZATION 

The profit maximization concept measures the performance of a firm by looking at its total profit. The profit maximization concept does not consider the effect of earnings per share, dividends paid or any other return to shareholders on the wealth of shareholders. 

On the contrary, the objectives of wealth maximization consider all future cash flows, dividends, earnings per share, risk of a  decision etc. So the wealth maximization concept is operational and objectives in its approach 

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