Financial Management Essay

1035 WordsAug 31, 20125 Pages
Q1) Financial management is a part of Business management. Its duty is to the company's financial activities such as: forecasting, organization, coordination, analysis and control. The corporate of finance activities can be divided into production and management, financing, investment and profit distribution. Financial management is to apply scientific approach to decision making in financial activities. Its goal is to maximize profit and shareholder wealth, which makes financial management in a core of business management, so to establish a goal of financial management is very important for a company’s long-term development. However, what’s problem will we found in the process of achieving the objectives? The following will be analyzed. There is no company willing to do a losing proposition, so we need to set a criterion to objective assessment that a financial decision is worth to implement or not. And these are a role of company’s financial managers or agents. Because they know how to get maximize profit. But they are really for the company to maximize profits? First, in a corporation company, as the separation of management and ownership, the owner of the company's shareholders, but the operators is the management, the management of company does not hold whole shares, they will take all possible action to establish the irreplaceable nature of the position, the other things is the management needs to share operating results with others, management may not work hard for increase shareholder wealth. The others method is employing agents to handle the financial management. But assuming each other to get information is asymmetric. Agent of moral issues may arise, due to insufficient information and lack of full understanding of the agent characteristics, they may be based on self-interest, tend to cheat the shareholders, the shareholders may make the wrong

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