Question: Which One Of The Following Best Matches The Primary Goal Of Financial Management?

What is the most widely accepted goal of financial management?

The most widely accepted goal of the firm is ‘to maximise shareholder wealth’ or ‘market value of the firm’.

This goal incorporates both the profitability and risk into one objective.

The firm can maximise shareholder wealth by investing in only those projects that generate positive net present values (NPV)..

What are the goals and objectives of financial management?

The objectives of financial management are given below:Profit maximization. … Wealth maximization. … Proper estimation of total financial requirements. … Proper mobilization. … Proper utilization of finance. … Maintaining proper cash flow. … Survival of company. … Creating reserves.More items…•

What do you mean by working capital concept of funds?

Definition. Working capital is the amount of cash a business can safely spend. It’s commonly defined as current assets minus current liabilities. Usually working capital is calculated based on cash, assets that can quickly be converted to cash (such as invoices from debtors), and expenses that will be due within a year …

What are the two objectives of financial management?

This is the main objective of Financial Management. Maintaining proper cash flow is a short run objective of financial management. It is necessary for operations to pay the day-to-day expenses e.g. raw material, electricity bills, wages, rent etc. A good cash flow ensures the survival of company.

What are the principles of financial management?

10 Basic Principles of Financial ManagementOrganize Your Finances. Organizing your finances is the first step to creating wealth. … Spend Less Than You Earn. … Put Your Money to Work. … Limit Debt to Income-Producing Assets. … Continuously Educate Yourself. … Understand Risk. … Diversification Is Not Just for Investments. … Maximize Your Employment Benefits.More items…•

Which of the following is the primary goal of financial management?

The primary goal of the financial management is to maximize the wealth of owners. All businesses aim to maximize their profits, minimize their expenses and maximize their market share.

What is the goal of financial management for a sole proprietorship?

The goal of sole proprietorship financial management for tax purposes is to document and organize information about company transactions to facilitate the process of filling out tax forms.

Which of the following accounts are included when calculating a firm’s working capital?

To calculate the working capital, compare a company’s current assets to its current liabilities. Current assets listed on a company’s balance sheet include cash, accounts receivable, inventory and other assets that are expected to be liquidated or turned into cash in less than one year.

What is the aim of financial management?

The primary objectives of financial management are: Attempting to reduce the cost of finance. Ensuring sufficient availability of funds. Also, dealing with the planning, organizing, and controlling of financial activities like the procurement and utilization of funds.

What are the 4 main components of working capital?

Working Capital Management in a Nutshell A well-run firm manages its short-term debt and current and future operational expenses through its management of working capital, the components of which are inventories, accounts receivable, accounts payable, and cash.

How do you calculate NWC?

Net Working Capital FormulaNet Working Capital = Current Assets – Current Liabilities.Net Working Capital = Current Assets (less cash) – Current Liabilities (less debt)NWC = Accounts Receivable + Inventory – Accounts Payable.

What are the features of financial management?

Based on the above definitions, the following are the main characteristics or features of financial management:Analytical Thinking: … Continuous Process: … The basis of Managerial Decisions: … Maintaining Balance between Risk and Profitability: … Coordination between Process: … Centralized Nature: … Determining financial needs:More items…