Managerial finance functions/ Managerial functions of finance

 

Managerial finance functions/ Managerial functions of finance 


 

Managerial finance functions are done by the top level of management. In this function the manager does the planning, organizing, directing and controlling financial resources to achieve the organizational goal. For these different financial functions are done by top level Mangement which is shown below: 

 

1. Investment decisions 


 Investment decisions is one of the major functions of finance. These types of functions are down from top level of management. It is most important and necessary function of top-level of management because in this function a manager should decide to purchase fixed Assets like plant, machinery, equipment land and Building. This type of function is very risky. For investing, company spends presently large amount of capital which is certain but the return Come back in the future which is uncertain. So, the manager takes decisions by searching different financial activities, and choose the best investment from different alternatives which can give best return to the company. 

 

2. Financing decisions 


 financing decision means the decision. about capital structure. How the company manage their capital that is financing decision. There are two types capital. One is equity capital and other is debt capital. Debt capital is low costly than equity capital and it saves taxes also. But increasing of more debt capital is riskier also. Because if the company cannot pay interest and principal in the time, then company can be failed. In this way if we increase equity capital, this capital is expensive and reduce the controlling power also. Therefore, the manager should make best decision about financing or we can say that manager should manage the best ratio of equity capital and debt capital. In the company managing of equity and debt ratio is called financing decisions. If there are more fixed assets in our company then we can take debt capital otherwise we have to manage fund from equity capital. 

 

3. Working capital decisions  


working capital means that types of capital which is used for daily operating activities. Working capital works in organization as works blood in our body. Therefore, the manager should manage working capital. These types of capital also should be maintained as effective limit. Over uses of working capital decrease the long-term investment fund and under uses of working capital provides difficulties in our organizational daily activities like Shortage of raw materials, and other working materials. The manager decides optimum limit of working Capital to achieve organizational goal. 

 

 

4. Dividend decisions 


 Dividend decisions mean the decision about distribution of net profit to shareholders. The company distribute net profit by three ways: 

 i. Distribution of profit as cash. 

 ii. Distribution of profit as bonus shares 

 iii. Distribution of profit as cash and Bonus shares both. 

 So, what types of distribution is suitable for current situation, the manager has to make good decision. 

 Manager also should decide how much dividend is suitable for distribution. Because dividend is distributed according to company’s net profit. If the net profit is high then high dividend is distributed, if profit is low then low and if profit is zero or less than zero then no dividend is distributed. At the time of distribution company also save some profit as retained earnings for reinvestment. In this way manager should make a good decision for achievement of business goal and for satisfaction. of shareholders. Therefore, dividend decision is also a managerial function of finance. 

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