Financial managers are responsible for the proper flow of funds. They help the company with the proper use of funds and also find appropriate sources of funds. They also invest excess cash to earn an additional income for the company.
In performing these duties, the financial manager has to manage the company’s working capital, develop capital budgets, and develop appropriate controls. So, here we discuss how to manage the finance of a firm.
How to manage the finance of a firm
1. Managing Working Capital
If a firm’s current liabilities are subtracted from its current assists, the result is the value of working capital. Working capital represents the amount of capital available for the day-to-day running of the firm.
Sufficient working capital is obviously important to the effective management of a firm’s operations.
2. Develop Capital Budgets
Capital budgets represent the funds allocated for future investments of the firm’s cash. These may be for the development of the factory installation, machinery, etc.
The process of capital budgeting involves comparing and evaluating alternative investments.
3. Developing Financial Control
Financial controls mean that once cash flow projections, capital budgets, and so on are established, they must be reviewed to make sure that the actual results match the projected ones.
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