The BCIT Professional Accounting Certificate program is designed to provide you with relevant knowledge and skills with immediate application in the field of accounting and is the first step towards your Financial Management Diploma. But, they entail a high degree of risk since they have to be repaid as per the terms of agreement; also, the interest payment has to be made whether or not the company makes profits. Funds can also be procured from banks and financial institutions, they provide funds subject to certain restrictive covenants. There are other financial instruments used for raising finance e.g. commercial paper, deep discount bonds, etc. The finance manager has to balance the availability of funds and the restrictive provisions tied with such funds resulting in lack of flexibility.
The funds are to be employed in the manner so that the company can produce at its optimum level without endangering its financial solvency. Thus, financial implications of each decision to invest in fixed assets are to be properly analysed. For this, the finance manager must possess sound knowledge of techniques of capital budgeting and must keep in view the need of adequate working capital and ensure that while firms enjoy an optimum level of working capital they do not keep too much funds blocked in inventories, book debts, cash, etc.
A sound financial management is essential in all type of financial organization – whether profit oriented or not, where funds are involved and also in a centrally planned economy as also in a capitalist set-up. Firms, as per the commercial history, have not liquidated because their technology was obsolete or their products had no or low demand or due to any other factor, but due to lack of financial management.
Even in boom period, when a company makes high profits, there is danger of liquidation, due to bad financial management. The main cause of liquidation of such companies is over-trading or over-expanding without an adequate financial base. Financial management optimises the output from the given input of funds and attempts to use the funds in a most productive manner. In a country like India, where resources are scarce and demand on funds are many, the need for proper financial management is enormous. In newly started companies, it is important to have sound financial management, as it ensures their survival, often such companies ignores financial management at their own peril.
A sound sense of financial management has to be cultivated among our bureaucrats, administrators, engineers, educationists and public at large. For maximising profit, risk is altogether ignored, implying that finance manager accepts highly risky proposals also. How much higher return is expected, depends on the risks involved in the particular share which in turn depends on company policies, past records, type of business and confidence commanded by the management.