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Definition

Financial management

Financial management is the process of raising money and managing a company’s finances in a way that achieves the highest rate of return.

The financial management of a firm deals with questions such as the following on an ongoing basis:

  • How are we doing? Are we making or losing money?
  • How much cash do we have on hand?
  • How efficiency are we utilizing our assets?
  • How do our growth and net profits compare to those of our industry peers?
  • Where will the funds we need for capital improvements come from?
  • Are there ways we can partner with other firms to share risk and reduce the amount of cash we need?
  • Overall, are we good shape financially?

A properly managed firm stays on top of the issues suggested by these questions through the tools and techniques.

In defense usage, financial management refers to the combination of the two core functions of resource management and finance support.  Also called FM.

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