Executive Together With Routine Functions Of Fiscal Management

Functions of fiscal management

Functions of financial management tin endure broadly divided into 2 groups:

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1. Executive functions of fiscal management, and
2. Routine functions of fiscal management.

Following icon depicts viii executive functions of fiscal management.

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1. Estimating capital requirements,
2. Determining working capital alphabetic lineament structure,
3. Estimating cash flow,
4. Investment decisions,
5. Allocation of surplus,
6. Deciding additional finance,
7. Negotiating for additional finance and
8. Checking the fiscal performance.

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

1. Estimating working capital alphabetic lineament requirements : The companionship must guess its working capital alphabetic lineament requirements (needs) really carefully. This must endure done at the advertisement stage. The companionship must guess its fixed capital needs too working working capital alphabetic lineament need. If not, the companionship volition larn out over-capitalized or under-capitalized.
2. Determining working capital alphabetic lineament structure : Capital construction is the ratio betwixt owned working capital alphabetic lineament too borrowed capital. There must endure a ease betwixt owned working capital alphabetic lineament too borrowed capital. If the companionship has besides much owned capital, too thus the shareholders volition larn fewer dividends. Whereas, if the companionship has besides much of borrowed capital, it has to pay a lot of interest. It also has to repay the borrowed working capital alphabetic lineament afterward simply about time. So the finance managers must educate a balanced working capital alphabetic lineament structure.
3. Estimating cash flow : Cash menstruum refers to the cash which comes inwards too the cash which goes out of the business. The cash comes inwards by too large from sales. The cash goes out for trouble organization expenses. So, the finance director must guess the hereafter sales of the business. This is called Sales forecasting. He also has to guess the hereafter trouble organization expenses.
4. Investment Decisions : The trouble organization 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 director must invest the cash properly. Long-term cash must endure used for purchasing fixed assets. Short-term cash must endure used equally a working capital.
5. Allocation of surplus : Surplus agency profits earned past times the company. When the companionship has a surplus, it has 3 options, viz.,
   1. It tin pay dividend to shareholders.
   2. It tin salvage the surplus. That is, it tin convey retained earnings.
   3. It tin rank bonus to the employees.
6. Deciding additional finance : Sometimes, a companionship needs additional finance for modernization, expansion, diversification, etc. The finance director has to produce upward one's remove heed on next questions.
   1. When the additional finance volition endure needed?
   2. For how long volition this finance endure needed?
   3. From which sources to collect this finance?
   4. How to repay this finance?
   Additional finance tin endure collected from shares, debentures, loans from fiscal institutions, fixed deposits from public, etc.
7. Negotiating for additional finance : The finance director has to negotiate for additional finance. That is, he has to verbalise to many banking concern managers. He has to persuade too convince them to rank loans to his company. There are 2 types of loans, viz., short-term loans too long-term loans. It is tardily to larn short-term loans from banks. However, it is really hard to larn long-term loans.
8. Checking the fiscal performance : The finance director has to banking concern check the fiscal functioning of the company. This is a really of import finance function. It must endure done regularly. This volition amend the fiscal functioning of the company. Investors volition invest their coin inwards the companionship entirely if the fiscal functioning is good. The finance director must compare the fiscal functioning of the companionship alongside the established standards. He must respect ways for improving the fiscal functioning of the company.

The routine functions are also called equally Incidental Functions.

Routine functions are clerical functions. They assist to perform the Executive functions of fiscal management.

The half-dozen routine functions of fiscal management are listed below.

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1. Supervision of cash receipts too payments.
2. Safeguarding of cash balances.
3. Safeguarding of securities, insurance policies too other valuable papers.
4. Taking proper assist of mechanical details of financing.
5. Record keeping too reporting.
6. Credit Management.