Question

2. Identify some of the forces that will affect financial management in the new millennium.

Answer 1

Financial management is the act of planning,organizing,directing and controlling the financial activities.It deals with the effective and efficient management of money.Financial management helps to determine the financial requirement of the business and take proper decisions.

Forces that affect financial management

• Financial regulations
• Corporate solvency
• Securities market
• Business lending

Financial regulations

Financial regulation is a form of regulation that create restrictions and guidelines on financial institutions.This will maintain the integrity of financial system.Financial regulation ensures safety and protect the consumers.Poorly regulated financial institutions can harm the customers and adversely affect the economy.Regulation protect the consumers from financial fraud like credit cards,mortgages etc.

Corporate solvency

Solvency is referred to the ability of a company to meet its long term debts and financial obligations.A company which is insolvent will end up in bankruptcy.If a company is solvent ,it is able to meet the expansion and grow.A company which has more current assets than current liabilities is said to be solvent.For the purpose of checking the solvency,it is better to look working capital of the company.A company's solvency determine its ability to stay in business.

Securities market

Healthy conditions in the market will affect the financial strategies in a positive manner.Securities such as New York stock exchange and Tokyo stock exchange enable the publicly traded companies to implement their financial strategies by raising cash as well as by purchasing long term investments.

Business lending

Business lending helps the organisations to operate in short term.All organisations borrow in the cash shortfall which result from delays in customer payments or donor remittance.Corporate credit refers to loans,overdraft,bonds etc.