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Objectives of Financial Management

An entrepreneur pursues the following objectives through financial management:

(i)    To procure sufficient funds for the business. The traditional objective of financial management is procurement of funds. Adequate and regular supply of funds is to be maintained for the smooth operation of the business. The funds must be raised at a reasonable cost.

(ii)    To ensure effective utilization of funds. It is also the objective of financial management to ensure optimum utilization of funds.

(iii)    To ensure safety of funds. Funds should be invested in business in such a way that safety of funds is ensured. The chances of risk in investments should be the minimum possible.

(iv)    To attain optimum capital structure. The cost of procurement of funds should be minimized by planning optimum capital structure. A sound and economical combination of shares and debentures must be attempted so as to obtain optimum capital structure.

(v)    To ensure adequate return to the shareholders. The shareholders’ return should be maximized. This objective could be achieved if the market price of shares of the company goes up. The market price of shares is largely dependent upon the performance of the company. It is a good indicator of net present value of the wealth of the shareholders.

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