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Financial Management Research Paper

1318 Words6 Pages

Financial management is an activity of financial decisions about the investment projects of firms and finding of sufficient funds needed to implement these projects. Financial management team is required in most companies due to the fact that successful financial plan plays a leading role in the development of firms. Taxation is the process by which governments collect taxes in order to have sufficient funds to cover all of its expenditures for the education, defense, healthcare, social security and other important sectors. Financial management exists as an essential factor in highly developed companies while taxation contributes to the economic robustness of country in a most effective way. Financial management, which is the management …show more content…

Until the 1950s there was a misconception that the role of financial manager is just to pursue short-run profit goals of stakeholders . In addition it was believed that financial managers principally dealt with acquiring of funds and managing cash flows of company . However, today financial management has a much more crucial strategic role in companies, pondering the importance of three vital decisions made by financial management team, including investment decision, capital structure decision and working capital decision. Firstly, financial managers make investment decisions, financial managers choose investment programs, which will most effectively contribute to the value of the company in the long-run . As a measuring tool financial managers use net present value, which is determined by discounting all future cash flows of project and subtracting initial investment . Financial managers accept projects with the positive net present value in order to increase the value of company shares. Second important decision made by financial managers is capital structure decision. …show more content…

It has been stated that financial management has a pivotal role in successful companies and taxation is one of the major causes of strong economy. Decisions about investments, structure of debt and equity, size of working capital are made by financial managers for the sake of contributing to the value of company, therefore the value contributing role of financial management expresses the main crucial aim of companies. Taxation has been strongly believed in this text that is a main factor of economic development in countries while discussing the role of taxation as a main source of government revenue, as a provider of income equality, as a main tool for coping with negative externality and as an essential tool of fiscal policy to stabilize the economy. As a result, with the detailed explanation of the important features of financial management in company success and vital contributions of taxation to the sustainable growth of economies, it is inevitable to admit that both financial management and taxation have substantial

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