What Does It Mean To “manage The Finances”?

Regional financial crises that shock world economy have their positive side. For example, they are at the level of national economies demonstrate the importance of a balanced budget; risk (risk-taking) of the emergence of a large number of “short debt,” etc.

A separate company, in this sense is a “state in miniature”, with the only difference that the decrease in size entails increase in risks. Russian financial crisis has confirmed this very clearly.

The main purpose of financial management and financial planning is:

To achieve a reasonable balance of assets and liabilities of the company. In other words, to ensure sustainable and appropriate cost sources to funding assets;

To ensure the adequacy of funds for all obligations of the enterprise as in terms as in magnitude.

Current and capital intensive operations [supply-related activities, investment and others] form needs in volume and nature of the financing [the structure and nature of the sources]. The task of financial management is to ensure these active operations with funding sources that corresponds to them by nature and structure. The second of the above problems are closely connected with the first. From the point of view of current activities (current operations), in the focus of finance controller there is a balance of payments, but basically it – the equivalence of assets of his business with commitments. It is impossible properly to generate payment transactions without the balance of assets and liabilities and first of all, current of assets and current of liabilities, and mainly for accounts to receive and accounts to pay.

The “double” content of financial planning (planning of assets and liabilities and receipts and payments) reflects the fact that there are two objects of financing: assets and operations.

Sources of financing of assets are liabilities, i.e. liabilities incurred in the company as the subject of civil rights to the owners of resources used by the company in its activities. These obligations can be debt [i.e. borrowed], can be returned upon the expiration of their provision, and equity [indefinitely] that form the obligations of the enterprise to its legal owners [shareholders. participants]).

The sources of finance operations are liquid assets that can be used as a means of payment (in the normal economic system, sources of financing are the funds and commercial paper).

Financial stability

The purpose of the financial management of the enterprise is ultimately achieving and maintaining its financial stability in the long term. The financial strength of companies in a broad sense is its ability to function, getting enough profit for their own production and timely performing of all payment obligations. In this sense, financially stable company is a company which activities provide:

Return on assets, not lower than rates on bank loans;

Return on equity, not lower than return on assets;

Balance of receipts and payments (incoming and outgoing financial flows) or a positive net cash flow in the medium term;

Sufficient mass of net income and amortization (including part of the social welfare and workforce development) to ensure the reproduction of the productive capacity of the enterprise.

Financial sustainability is an integral, general indicator, reflecting the status and business results.

Need help with financial planning – then we seriously recommend you to check out this web site with financial planning advice and other useful information.

Plus, one more piece of advice – today the web technologies give you a really unique chance to choose exactly what you require for the best price on the market. Funny, but most of the people don’t use this opportunity. In real practice it means that you should use all the tools of today to get the info that you need.

Search Google and other search engines for financial planning systems. Visit social networks and check the accounts that are relevant to your topic. Go to the niche forums and participate in the discussion. All this will help you to create a true vision of this market. Thus, giving you a real opportunity to make a wise and nicely balanced decision.

P.S. And also sign up to the RSS feed on this blog, because we will everything possible to keep this blog tuned up to the day with new publications about the market of financial planning products and services.

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