Basic Basic Concepts of Financial Management

Modern economy assumes as one of the fundamental factors of efficiency, the need for management and regulation of financial flows. This task, as a rule, is solved by financial management at the enterprise. It is for this purpose that the permanent interaction between managers and financial services is organized. The role of finance in a market economy presupposes an objective need to highlight the management of them in a special area - financial management.

It can be defined as the activity of financial management (in the broad sense of the concept) of an enterprise or a company with the aim of achieving its stated goals of management.

Being multifaceted, the concept and essence of financial management is realized in the following aspects:

- financial management exists in the form of a scientific discipline, the study of which is aimed at training qualified personnel in this field of activity ;

- as a system applied at each enterprise for effective financial management;

- as an independent and separate type of entrepreneurship.

As a scientific discipline, management in the field of finance is a set of theories, doctrines and doctrines, as well as applied technologies, procedures and methods for making managerial decisions. This sphere is in constant dynamics, theoretical concepts are constantly updated with the latest analytical data from practice, which need theoretical justification.

In modern economic science, the following basic concepts of financial management are distinguished: cash flows, agency relations, the efficiency of markets, the structure of capital, the temporary value of money, dividend policy, risk and profitability, and others. Let's consider some of them.

1. The cash flow doctrine assumes that each enterprise is a kind of resource with the help of which new money is created. Therefore, its value lies in how much the amount of money created is increased in comparison with the amount that was previously invested in it.

2. The doctrine of the temporary value of finance comes from the need to understand that our money at different times has a different value. So for investing money in a project, you should choose the most appropriate moment, which will bring the greatest profit.

3. Such basic concepts of financial management as risk theory and profitability are based on a simple and well-known assertion that the higher the risks, the higher the probability of obtaining both a positive result from their use and a negative one.

4. Portfolio theory also has a very mundane rationale: "one should never store all the eggs in one basket". To ensure the assurance of risk reduction, it is necessary to form a so-called investment portfolio, in which the funds are distributed in the form of various assets placed in various investment processes.

5. The concepts of the structure of capital answer the eternal question: "Where to take, how to better manage money?". The problem of attracting investments from reliable sources and their effective use is the main subject of research in this area of scientific management.

6. Basic concepts of financial management, investigating agency relations provide answers to questions related to the nature and causes of financial and economic troubles that may arise between business partners.

From the point of view of practical importance, the basic concepts of financial management are considered as a theoretical basis for the formation, justification and construction of effective business support models, in this particular case - effective management of cash flows and their sources.