Financial management is a management of financial functions. Financial functions include how to obtain funds (rising of funds) and how to use the funds (allocation of funds). Financial manager is concerned about determining the appropriate amount of assets from various assets investment and selection of funding sources to finance these assets. To obtain funds, financial manager can get it from within and outside the company. Sources from outside the company come from stock market, as in form of obligation or capital.
Financial management can be defined as tasks and responsibilities of financial manager. Main duties of financial management including decisions about investment, business activities financing and distribution of dividends of a company, thus, task for financial manager is plan for maximize the value of the company.
Another important activity that must be done by financial manager is concerning about four aspects, which are: the financial manager should work with other managers that in charge of company’s general plan. And the financial manager must focus on various investment and financing decisions, and all things that related to it.
Basically, the purpose of financial management is maximizing corporate value. However, behind this goal there is still a conflict between business owner and financial supplier as a creditor. If the company goes well, then the value of shares will increase, while the value of corporate debt in form of obligations is not affected at all.
So it can be concluded that the value of the stock ownership could be an appropriate index to measure the level of the company effectiveness.
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