Financial Goals and Strategy

15th October 2021 0 By indiafreenotes

Strategic financial management means not only managing a company’s finances but managing them with the intention to succeed that is, to attain the company’s goals and objectives and maximize shareholder value over time. However, before a company can manage itself strategically, it first needs to define its objectives precisely, identify and quantify its available and potential resources, and devise a specific plan to use its finances and other capital resources toward achieving its goals.

Strategic financial management is about creating profit for the business and ensuring an acceptable return on investment (ROI). Financial management is accomplished through business financial plans, setting up financial controls, and financial decision making.

  • Strategic financial management is about creating profit for the business.
  • A financial plan that is strategic focuses on long-term gain.
  • Strategic financial planning varies by company, industry, and sector.

Planning

  • Define objectives precisely.
  • Identify and quantify available and potential resources.
  • Write a specific business financial plan.

Budgeting

  • Help the company function with financial efficiency, and reduced waste.
  • Identify areas that incur the most operating costs, or exceed the budgeted cost.
  • Ensure sufficient liquidity to cover operating expenses without tapping external resources.
  • Uncover areas where a firm may invest earnings to achieve goals more effectively.

Managing and Assessing Risk

  • Identify, analyze, and mitigate uncertainty in investment decisions.
  • Evaluate the potential for financial exposure; examine capital expenditures (CapEx) and workplace policies.
  • Employ risk metrics such as degree of operating leverage calculations, standard deviation, and value-at-risk (VaR) strategies.

Establishing Ongoing Procedures

  • Collect and analyze data.
  • Make financial decisions that are consistent.
  • Track and analyze variance that is, differences between budgeted and actual results.
  • Identify problems and take appropriate corrective actions.