Executive As Well As Routine Functions Of Fiscal Management

Functions of fiscal management

Functions of financial management tin dismiss hold upwards broadly divided into 2 groups:

management, and

Routine functions of fiscal management.

Following icon depicts viii executive functions of fiscal management.

capital requirements,

Determining working capital alphabetic lineament structure,

Estimating cash flow,

Investment decisions,

Allocation of surplus,

Deciding additional finance,

Negotiating for additional finance and

Checking the fiscal performance.

These executive functions of fiscal management (FM) are explained below.

Estimating working capital alphabetic lineament requirements : The society must guess its working capital alphabetic lineament requirements (needs) really carefully. This must hold upwards done at the advertisement stage. The society must guess its fixed capital needs too working working capital alphabetic lineament need. If not, the society volition buy the farm over-capitalized or under-capitalized.
Determining working capital alphabetic lineament structure : Capital construction is the ratio betwixt owned working capital alphabetic lineament too borrowed capital. There must hold upwards a residuum betwixt owned working capital alphabetic lineament too borrowed capital. If the society has also much owned capital, thence the shareholders volition instruct fewer dividends. Whereas, if the society has also much of borrowed capital, it has to pay a lot of interest. It also has to repay the borrowed working capital alphabetic lineament later on to a greater extent than or less time. So the finance managers must railroad train a balanced working capital alphabetic lineament structure.
Estimating cash flow : Cash menstruation refers to the cash which comes inwards too the cash which goes out of the business. The cash comes inwards to a greater extent than oft than non from sales. The cash goes out for describe organisation expenses. So, the finance managing director must guess the futurity sales of the business. This is called Sales forecasting. He also has to guess the futurity describe organisation expenses.
Investment Decisions : The describe organisation gets cash, mainly from sales. It also gets cash from other sources. It gets long-term cash from equity shares, debentures, term loans from fiscal institutions, etc. It gets short-term loans from banks, fixed deposits, dealer deposits, etc. The finance managing director must invest the cash properly. Long-term cash must hold upwards used for purchasing fixed assets. Short-term cash must hold upwards used every bit a working capital.
Allocation of surplus : Surplus way profits earned past times the company. When the society has a surplus, it has 3 options, viz.,
1. It tin dismiss pay dividend to shareholders.
2. It tin dismiss relieve the surplus. That is, it tin dismiss bring retained earnings.
3. It tin dismiss reach bonus to the employees.
Deciding additional finance : Sometimes, a society needs additional finance for modernization, expansion, diversification, etc. The finance managing director has to arrive at upwards one's hear on next questions.
1. When the additional finance volition hold upwards needed?
2. For how long volition this finance hold upwards needed?
3. From which sources to collect this finance?
4. How to repay this finance?
Additional finance tin dismiss hold upwards collected from shares, debentures, loans from fiscal institutions, fixed deposits from public, etc.
Negotiating for additional finance : The finance managing director has to negotiate for additional finance. That is, he has to beak to many banking enterprise managers. He has to persuade too convince them to reach loans to his company. There are 2 types of loans, viz., short-term loans too long-term loans. It is slowly to instruct short-term loans from banks. However, it is really hard to instruct long-term loans.
Checking the fiscal performance : The finance managing director has to cheque the fiscal functioning of the company. This is a really of import finance function. It must hold upwards done regularly. This volition ameliorate the fiscal functioning of the company. Investors volition invest their coin inwards the society solely if the fiscal functioning is good. The finance managing director must compare the fiscal functioning of the society amongst the established standards. He must respect ways for improving the fiscal functioning of the company.