Financial management, Finance Basics

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Financial Management

On the other hand a financial manager has to meet the company's strategic or long term needs as long term investment are helpful to the company since:

1. It influences the company size as assets

2. It influences its growth as plough back

3. Finances incidental needs.

4. It influences the company's long-term survival - this is with continuous investment.

These investments will call for long term financing in form of owners finance as Ordinary Share Capital and Revenue reserves.  This is a base on that other finances are raised.  The company will furthermore use external financing as example debentures, loans, debts, mortgages, lease finance etc.  These finances have to be employed in acceptable or reasonable financial mix.  This implies such the company's gearing level is remained low i.e. the relationship between creditors and owners finance.  This have to be below 67% otherwise the company may be forced into subsequently and receivership liquidation.


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