Financial management in the enterprise

One of the most important components of any financial activity is the formation and use of funds. Therefore, the financial management of the enterprise is an important part of system administration activities of the company, which is associated with investment decisions, which are based on relevant concepts and methods.

The Main purpose of financial management is profit. However, the enterprise may be quite profitable, but unstable. This leads to the fact that managers must constantly maintain solvency. Particularly important and difficult task is to produce a settlement with shareholders, the owners. Moreover, financial management may have several goals that are based on the stages of the life cycle of the company, its competitiveness. However, the most effective way is to satisfy the interests of investors and owners through improving their welfare. This is possible due to the increase in value of the company through the mechanism of the formation and use of profit the most effective way.

In order For the financial management of the company was effective, was developed a number of principles:

• First, the legal and economic independence. Firm, regardless of the form of ownership, determines the costs, sources of income, cash flows and their direction for the purpose of making a profit. For these purposes it is possible to use additional means, such as the purchase of securities, participation in the formation of the initial capital of other companies making money in the Deposit account. To date, the independent contractor must instantly adapt to changing conditions and quickly make a strategic plan.
• Second, self-financing, which means meeting the full cost recovery required for production and further implementation, as well as the development of production. First of all, financial management is carried out through the account of all expenses of the company, including execution of credit obligations.
• Third, financial interest, which is determined by the profit. This criterion concerns the state in a broad sense, the collective and each worker of the enterprise – in a narrow. He provided a stimulating tax system, appropriate levels of remuneration etc.
• Fourth, financial liability, which is determined by the system availability report for the results of monetary relations. For a particular firm's financial management this principle is implemented through a system of fines, penalties, penalties. Moreover, this principle consists of the fact that the deterioration of capital turnover leads to impossibility of smooth operation. The responsibility of the individual entities is implemented through penalties, revocation of awards.
• Fifth, the use of financial reserves for security risks. Any activity that is aimed solely at making a profit, is a risk. The latter, in turn, have an impact on results of operations in financial terms.

The Solution of complex problems leads to the need for financial planning, as well as the formation of the budgeting system. The methods used to achieve the goals, define the financial policy of the company. For example, recently in the EU financial management is carried out by criteria aimed at achieving maximum added value. Any method requires use of a wide range of skills and application of knowledge.