Ans :
Every company has various business units that help it function and grow. Of all these departments, it is probably finance that exists even before a company has started working. It is the finance people who decide if a venture is viable and how it can earn revenue to sustain itself. For such an important department, it is essential to have excellent management. Finance is a necessary and critical part of any organization. It is difficult for profit-making or other organizations to sustain themselves for long without proper finances. Apart from this reason, the efficient management of these financial resources is essential to be sustainable and viable in the long run. Financial Management helps organizations to do so. This term refers to the effective and efficient planning, organizing, directing, and controlling the financial activities and processes of an organization. This includes fund procurement, allocation of financial resources,
utilization of funds, etc., apart from various other functions.
The past two decades have been witnessing radical changes in the financial system
world over. The significant changes which have been taking place over the years are:
a) Low interest rate regime
b) Exchange control and convertibility
c) Development of capital markets
d) Less intermediation
e) Introduction of hybrid financial instruments
f) Increase in risk exposure
g) Volatility in commodity prices
h) Substantial lowering of custom duty (Removal of trade barriers.
These changes coupled with changing customer needs, technology driven innovations and regulatory changes are imposing substantial changes in the financial systems world over.
The impacts of these changes are as follows:
1) Increased competitions have resulted in the rationalization of pricing and costs. Companies having high cost structure are being forced to rationalize operations.
2) National financial system is now more closely integrated with international financial system.
