Financial management

CHAPTER 1 INTRODUCTION

1.1 Introduction to Financial management

Financial management is an important aspect of every type of business whether it is manufacturing, retailing, wholesaling or entertainment. It helps in managing the cash outflows and cash inflows of the business. It is all about making financial plans to achieve stability and growth. Business owners can never ignore the importance of financial management. It acts as the valuable tool which needed to move ahead with the expansion plans (Arnold, 2005). There are some important future decisions which are to be made for the future. Keeping records of monetary transactions and events is an aspect of financial management. These records are presented in the form of reports. No business company can utilize its full potential for growth and expansion without proper administration and effective utilization of finance (Baker and Baker 2009). Financial management is regarded as the key to the successful business operations. It includes decisions related to investment, finance and dividend. Among the three, financing decisions are concerned with estimation of funds which are needed to acquire the assets. The process is more related with financing mix or capital structure or leverage and the owner has to identify the proportion of debt and equity (Booker, 2006). It should be optimum finance mix which maximizes the investment of shareholders.

A proper balance is essential between risk and return. It can be said that financial management helps in promotion and smooth running of business. If any plan fails due to inadequate capital, it is very difficult to carry all business activities effectively and efficiently (Hawawini and Viallet 2010). Finance is needed at every level of company like research, development, promotion, expansion and in management of expenses. Financial administration becomes inevitable for smooth functioning of operations. It offers scientific analysis of all facts and figures through financial tools such as variance analysis, ratio analysis, budgets etc. Such techniques helps the management in evaluating profitability of the plan and also helps in taking appropriate decisions to minimize the associated risk (House of Commons., 2008).

Events like festivals also need proper financial sources for carrying out their business operations. The festivals can be related to anything such as music, arts, films, culture, education etc. Money is needed at all levels for doing sponsorship, marketing, and programming as well as event planning etc (Baker and Baker 2009). Though these festivals donates most of their profits to charities but still they need proper financing to do proper arrangements for visitors who are coming to the festivals. It makes planning perfect and effective. Mostly these kind of events runs for 2-3 days or even a week. Hence the organizers have to handle all the services that are related to retail, accommodation, food, catering, volunteers, logistics, transportation etc (Booker, 2006). Hence, financial management is important to handle all the day to day expenses and to manage all the cash flows. It helps in making the financial decisions very sound and secure. Under prevailing situation, with the availability of information and scarce resources, financial management makes the decision very effective. Under these kinds of festivals, it can be regarded as an intelligent quest for optimal use of financial and other economic resources at user's disposal (Howarth and Gruen 2005).

1.2 Source of finance

Without appropriate financing business is incomplete. These sources help in running the business continuously and smoothly. There has to be stability in all the sources which means income must arise from them regularly. Selection of the source depends on the size and scale of the business. All needs and requirements are taken into consideration and then feasibility analysis is performed regarding the assessment of that source (Winand and et. al. 2012). It is important that right mode of finance is selected. Another major aspect is to analyse the costs and implications for these sources. Company must have the potential to bear those costs that is associated with a source. Selection can be done keeping in mind the nature of the business also. Hence, it can be said that finance act as backbone for every kind of business (Howarth and Gr

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