Importance / significance of financial management

• Economic growth and development: through investing decision, financing decision, dividend decision, and risk management decision, better and more economically viable projects are undertaken by companies. The resultant effect on the economy is economic growth and development. Financial management serve as a good guide to online investing.

• Improved standard of living: growth and development in the economy that is brought about by financial management will ultimately translate into improved standard of living for all.

• Improved health: again, good economic condition and improved standard of living culminates into improved health as a lot of ‘financial stress’ related sicknesses will be completely eliminated or reasonably reduced.

• Allows for better financial decision

• Creates jobs – those that teach financial management and the jobs that are created as a result of flourishing economy. Better financial decisions will lead to profitability, and profitability will eventually lead to expansion which will in turn mean more jobs.

• Alleviation of poverty

• Preserve our environment

• Promotes efficiency: good financial management does not give room for wastes and inefficiencies that characterizes poor financial management and decision making.

The importance of financial management can take us a whole lot of space to finish listing. This is to say that the once listed above are just but few.

Traditional areas of financial management

Finance in all sense of it is about cash flows. The management activities of finance can be viewed from four areas. Namely,

1. Capital structure

2. Capital budgeting

3. Long-term financing

4. Working capital management

Each of these areas can take a full textbook to adequately be discussed. Therefore, I will not delve into discussing it in this article. Look around this site and read up other articles for more information.

Exercise 3. Use an appropriate word or phrase from the box to complete each sentence.

product range, sales revenue, growth rate, product line, market share, production capacity, resources, productivity, performance, output

1. A well-known advertising aims to achieve a …………. of 20% a year.

2. It continues to get about two-thirds of its revenue from this one product, n despite repeated efforts to diversify its …………….. .

3. We have the necessary financial ……………. to respond to these problems.

4. ………………. is a measure of how much is produced in relation to the number of employees.

5. We’re a small firm, so we aren’t able to offer a wide ……………. .

6. Our …………….. has gone up again, with a throughput of 800 tabloid pages per week.

7. Most of Shell Oil’s ……………… comes from overseas subsidiaries.

8. Our strategy through the year was to maintain ………………and control costs.

9. The plant has an annual ……….. of around three million metric tons of steel.

10. The company is showing strong ……………. and doing considerably better than the retail industry as a whole.

Exercise 4. Choose one of the words that matches the explanation best.

1. A general tendency in the way a situation is changing or developing is called

a) direction

b) trend

c) style

2. Not happening immediately, but not over a very long period of time:

a) long-term

b) medium-term

c) short-term

3. Producing goods using as little time, money etc as possible:

a) productive

b) economic

c) efficient

4. To make shares available for people to buy:

a) put in circulation

b) issue

c) release

5. Coming from outside a company, organisation or country:

a) external

b) exterior

c) foreign

6. A sign of the level of activity in the economy or in a particular company or financial market is called

a) indicator

b) mark

c) index

7. Relating to a company or business in general:

a) communal

b) corporate

c) joint

8. Prices that are not too high:

a) median

b) reasonable

c) knockdown

Exercise 5. Match these terms with their definitions.

1) outlet	a) a business activity in which two or more companies have invested together
2) joint venture	b) someone who works for parts of the week
3) stock option	c) a place or large building that is used to make or provide a particular product or service
4) enterprise	d) using the most modern and recently developed methods, materials, or knowledge
5) part-timer	e) a company or business
6) aficionado	f) a shop, company or organization through which products are sold
7) facility	g) able to understand situations or behavior very well and very quickly, bright, keen
8) astute	h) an option to buy shares at a particular price, esp. an option given to employees to buy shares in the company they work for
9) state-of-the-art	i) to start something, esp. something new and difficult that will take a long time
10) embark	j) someone who is very interested in a particular activity or subject and knows a lot about it

Exercise 6. Use an appropriate word or phrase from Exercise 1 (1 column) in the correct form to complete each sentence. The first letter of each word is given.

1. The company started as a family e………………… .

2. S……… o………… is benefit that lets employees buy company shares at a low price.

3. Saudi Arabia and Japanese officials agreed on a j……….. v…………. to build oil refineries in both countries.

4. The farmers need to find more o…………. for their produce.

5. In the 1950s China e……………. on a major program of industrialization.

6. It was an a ………….. move to sell the shares then.

7. We employ about 20 p…………….., mainly women who have children.

8. Everything we do is s………………….., using the most advanced techniques available.

9. Torness Harbour has the best permanent docking f……………. on Scotland’s south-east coast.

10. Starbucks was started by three coffee a……………….. .

Lesson 15. The concept of differentiation of the vocabulary of professionally-oriented foreign language by application.