Modern economy assumes, as one of the fundamental factors of efficiency, the need to manage and regulate financial flows. This task, as a rule, is solved by financial management at the enterprise. It is for this purpose that constant interaction is organized between managers and financial services. The role of finance in a market economy implies the objective need to allocate their management activities in a special area - financial management.
It can be defined as financial management activities (in the broad sense of the concept) of an enterprise or company in order to achieve its business goals.
Being multifaceted, the concept and essence of financial management is implemented 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 used at each enterprise for effective financial management;
- as an independent and isolated type of business.
As a scientific discipline, financial management is a combination of theories, doctrines and teachings, 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, agent relations, market efficiency, capital structure, time value of money, dividend policy, risk and profitability and others. Let's consider some of them.
1. The doctrine of cash flows suggests that each enterprise is a kind of resource with which new money is created. Therefore, its value lies in how much the amount of money created increases compared to the amount that was previously invested in it.
2. The doctrine of the time value of finance comes from the need to understand that our money at different points in time have different values. Therefore, to invest money in any project, you should choose the most suitable moment, which will bring the greatest profit.
3. Such basic concepts of financial management as the theory of risks and profitability proceed from the simple and well-known statement that the higher the risks, the higher the likelihood of receiving both a positive result from their use and a negative one.
4. The portfolio theory also has a quite everyday rationale: "you should never store all the eggs in one basket." To ensure guaranteed risk reduction, a so-called investment portfolio should be formed in which funds are distributed in the form of various assets placed in various investment processes.
5. The concepts of capital structure answer the eternal question: “Where to get it, how is it better to 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. The basic concepts of financial management exploring agent relations provide answers to questions related to the nature and causes of financial and economic turmoil that may arise between business partners.
From the point of view of practical significance, 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.