Secondly, the practical sections of the book are based on a comprehensive and accessible presentation of the basic concepts of financial management. Independent chapters are devoted to studying the value of money over time, the valuation of stocks and other financial assets, and the risk and return of securities.
Third, although the book is intended to be used as a fundamental textbook for financial management courses, it can serve as a reference for financial professionals and a guide to preparing for the Certified Financial Analyst exams.
Fourthly, immediately after studying the chapter’s material, you can try your hand at solving problems of various levels of complexity. At the same time, he can check his progress in the material’s assimilation right, referring to a particular section with a detailed presentation of the improvement in solving these problems.
And fifthly, the book has an English-language site; you can consolidate their information on financial terminology using the materials.
This publication aims to familiarize readers with the decision-making process in the financial industry and teach them how to correctly interpret the impact of these financial decisions on the creation of company value. It is designed not only for pupils of economic universities but also for students of advanced training courses for managers, persons preparing for various professional examinations, and practitioners in the field of finance. Before considering the essence and content of financial management, it is necessary to determine the nature of control in financial management, namely the enterprise’s finances.
Economic and monetary relations arise in production and commercial activities, commonly called finance.
Enterprise finance is a set of economic relations through which decentralized funds of funds remain formed, distributed, and used – both for the enterprises’ needs (ensuring a continuous process of expanded reproduction) and for meeting national needs.
The basis of finance is the phenomena arising from the accumulation, spending, and use of funds at all levels of management. However, their actions impact different areas of activity depending not only on the number of resources, their direction, and use but also, to a large extent, on organizing financial relationships between participants in the production process.
The Origin and Evolution of Financial Management
At a particular stage of social development, there is an objective need to create and use on a scientific basis an integrated management system for such a complex phenomenon as the finances of an enterprise. Of particular importance are the problems of the effective use of finance in a market economy, often called a money economy.
The intellectual revolution, the rise of the economy in many developed countries, which began in the 40s, created the prerequisites for forming an integrated scientific system for managing the financial activities of enterprises.
- The first half of the 50s of the 20th century. – Creation of theoretical foundations for the use of discount methods for evaluating the effectiveness of investment projects’ financial investment models (formation of a portfolio of securities), making it possible to influence risk reduction positively. At the same time, standard working capital management models were substantiated, aimed at more rational use of monetary resources, inventories, and funds in settlements.
- The first half of the 60s – the use of new methods for analyzing an enterprise’s property (assets), focusing on operations with securities.
- The 70s – attraction of new stock market instruments, primarily options, their use in the selection and implementation of investment projects
- The 80s – the introduction of numerous innovations in the methodology and forms of financing, lending to business entities, the accumulation of capital and its expenditure, the methods of ensuring enterprises against risky losses, and the consequences of increasing competition.
Enterprise Financial Mechanism
The financial mechanism should contribute to the enterprise’s most complete and effective implementation of finance functions.
The financial mechanism of an enterprise is a system for managing its finances. As established by the state’s requirements of economic laws by adopting legislative and regulatory acts, enterprises consider their characteristics and tasks. They are designed to organize the interaction of an enterprise’s financial relations and funds to influence the production results effectively. Thus, the financial mechanism is a system for managing economic relations and monetary funds.
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