Task 6. Read, translate the following text and try to retell it.

Financial management

Financial Management can be defined as: the management of the finances of a business / organization in order to achieve financial objectives. Taking a commercial business as the most common organizational structure, the key objectives of financial management would be to:

• Create wealth for the business

• Generate cash, and

• Provide an adequate return on investment bearing in mind the risks that the business is taking and the resources invested.

There are three key elements to the process of financial management:

1. Financial Planning. Management need to ensure that enough funding is available at the right time to meet the needs of the business. In the short term, funding may be needed to invest in equipment and stocks, pay employees and fund sales made on credit. In the medium and long term, funding may be required for significant additions to the productive capacity of the business or to make acquisitions.

2. Financial Control. Financial control is a critically important activity to help the business ensure that the business is meeting its objectives. Financial control addresses questions such as:

• Are assets being used efficiently?

• Are the businesses assets secure?

• Do management act in the best interest of shareholders and in accordance with business rules?

3. Financial Decision-making. The key aspects of financial decision-making relate to investment, financing and dividends:

• Investments must be financed in some way - however there are always financing alternatives that can be considered. For example it is possible to raise finance from selling new shares, borrowing from banks or taking credit from suppliers.

• A key financing decision is whether profits earned by the business should be retained rather than distributed to shareholders via dividends. If dividends are too high, the business may be starved of funding to reinvest in growing revenues and profits further.

Financial managers aim to boost the levels of resources at their disposal. Besides, they control the functioning on money put in by external investors. Providing investors with sufficient amount of returns on their investments is one of the goals that every company tries to achieve. Efficient financial management ensures that this becomes possible.

Strong financial management in the business arena requires managers to be able to:

• Interpret financial reports including income statements, Profits and Loss or P&L, cash flow statements and balance sheet statements;

• Improve the allocation of working capital within business operations;

• Review and fine-tune financial budgeting, and revenue and cost forecasting;

• Look at the funding options for business expansion, including both long and short term financing;

• Review the financial health of the company or business unit using ratio analyses, such as the gearing ratio, profit per employee and weighted cost of capital;

• Understand the various techniques using in project and asset valuations;

• Apply critical financial decision making techniques to assess whether to proceed with an investment;

• Understand valuations frameworks for businesses, portfolios and intangible assets.