University of Technology, Jamaica
Unit 1: Financial Management & Environment
What is Financial Management?
At the macro level, finance is the study of financial institutions and financial markets and how
they operate within the financial system. At the micro level, Financial Management involves the
management of money and/or funds of an organization. It involves (i) Financing decisions ie
making decisions regarding financial planning, fund raising,(ii) Investment decisions eg.
Acquisition of assets (iii)Management of assets for businesses and financial institutions with
some overall goal in mind. This goal is usually that of maximizing shareholders’ wealth.
The Financial Manager is primarily concerned with analyzing and interpreting financial
information including that captured in the firm’s accounts for decision-making purposes.
Some functions and responsibilities of the financial manager include:
Acquisition of funds short term financing – bank loans, etc. and long term financing – stocks
(equity) and bonds (debt) for investment in assets.
Allocation (uses) of funds: Short term – working capital management, and long term – capital
management (stocks and bonds)
Forecasting and planning – this includes providing advice and recommendations to executive
management.
Investing and financing decisions
Coordination and control as a member of the management team – financial managers need to
work closely with other managers in the organization in order to determine the best financial
decisions to make and also to communicate those decisions to the rest of the organization.
Interaction with financial markets – link between financial markets and the organization.
Managing risk – ensuring that financing, allocation and management of assets is done with
minimal risk.
The goal of the firm remains, primarily, the maximizing of the wealth of the stockholders, its owners.
Wealth maximization is not the same thing as profit maximization. Profit maximization is more short
