Page 5 - DBP5043

Basic of Financial

Management?

Imagine that you were to start your own business. No

matter the type of business, you would have to answer

the following three questions in some form or another.

1. What long term investment you take on? That is,
what lines of business will you be in and what sorts of

buildings, machinery and equipment will you need?

2. Where will you get the long-term financing to pay

for your investment? Will you bring in other owners or

will you borrow the money?

3. How will you manage your everyday financial

activities such as collecting from customers and paying
suppliers?

Financial management is concern with the

management of all matters associated with the cash

flow of an organization both short‐term and long
term. How the company uses its funds typically by

buying non‐current assets and funding its working

capital and where the funds came from typically
from the shareholders (equity) or by borrowing money

from third parties (loans/debt).