The role of financial management in enhancing the competitiveness of the company

Table of contents: The Kazakh-American Free University Academic Journal №7 - 2015

Authors:
Urazova Natalya, Kazakh-American Free University, Kazakhstan
Litvinenko Victoriya, Kazakh-American Free University, Kazakhstan

In a market economy the financial flows are the main object of management in any enterprise, as each economic decisions directly or indirectly related to the movement of funds. Therefore, the majority of managers have to somehow interact with financial services in the process of implementation of their functional tasks. In this context, knowledge of the basics of financial management is necessary for every middle and senior management for a deeper and more comprehensive understanding of the challenges facing the company, and effectively perform their functions. Currently, financial management is one of the most dynamic processes aimed at solving a variety of problems arising in the course of business management.

Financial management in the management of financial flows includes the development and selection of criteria for sound management decisions, as well as the practical application of these criteria taking into account the specific conditions of the enterprise. Therefore, the role of financial management in enhancing the competitiveness of enterprises began to increase in recent years [1, p. 56].

In the current environment of instability of the Kazakhstan economy it is extremely important to find approaches and priorities in the management of financial organizations and enterprises, adequate environmental conditions and related opportunities and challenges. Mastering the skills of financial management by financial managers provides features such enterprise.

Financial management is a science and an art. On the one hand, it is a science as well as the adoption of any financial solutions requires not only the conceptual foundations of the financial management of the company, scientific methods of their implementation, and the general laws of development of market economy. On the other hand, it is an art, as well as the most financial solutions focused on future competitive success of the enterprise, which involves a combination of methods of financial management, based on a high level of professionalism and knowledge of the intricacies of the market economy.

The relevance contained in the research topics is that via theoretical and practical skills of financial management in the running company competitiveness determined by the need to create a unified system of financial impact on the balanced movement of capital resources within business structures, the use of market legislation to control money in circulation and the formation of target sources funding to stimulate business activity, political growth, capital accumulation and efficient reproduction processes, i.e. financial management will not only normalize and restore the cash flow, but also implement the principles of self-sufficiency and self-financing under market conditions as a consequence of increasing the competitiveness of enterprises.

In a market economy, the competitiveness is an important factor in ensuring economic stability and, in some cases, survival of the company, which is important both in the impact of adverse external factors (global financial crisis), and in the right conditions to ensure its sustainable development.

Only effective traffic management of its financial resources (capital) can provide competitiveness to any economic entity, using the methodology, methods, and techniques of financial management, which is achieved through a system of financial management of the enterprise.

Financial management allows to manage the cash flow of the enterprise, attracting the most rational sources of financial resources and use them most effectively to achieve the strategic and tactical objectives of the enterprise [2, p. 98].

The cash flows are the subject of financial management which reflect the movement of capital.

The strategic goal of financial management is to maximize the welfare of the owners of the company, which is expressed in the maximization of the market value of the company (for shareholders - to maximize market share price), profit maximization. This approach is based on the following basic idea of the development of society - the achievement of social and economic prosperity of society through private property.

Other fundamental goals of financial management are:

1) the survival of the enterprise in the competitive environment;

2) avoiding bankruptcy and major financial setbacks;

3) leadership in the fight against competitors;

4) the steady growth of the economic potential of the enterprise;

5) the increase in the volume of production and sales;

6) minimization of costs;

7) ensure cost-effective operations, and so on.

The priority of a particular purpose can be differently explained by existing theories of business organization. The activities of the financial manager can be grouped in the following areas:

1) the overall analysis and planning of the property and financial situation of the company;

2) provision of financial resources of the enterprise (management of sources of funds);

3) allocation of financial resources (investment policy and asset management).

Dedicated activities define the main objectives. The overall assessment is carried out within the first direction:

- assets of enterprise and sources of their financing;

- the quantity and composition of the resources needed to sustain economic potential of the company and expand its activities;

- sources of additional funding;

- control over the condition and effective use of financial resources [3, p. 45].

The second area involves a detailed assessment:

- the volume of the required financial resources;

- forms of supply;

- methods of mobilization of financial resources;

- level of availability and time of provision;

- costs associated with the involvement of the types of resources;

- risks associated with the specific source of funds.

The third area involves:

- analysis and evaluation of the long-term and short-term nature of the investment decisions;

- optimal transformation of financial resources into other kinds of resources;

- appropriateness and effectiveness of investments in fixed assets, their composition and structure;

- optimal working capital as a whole and by type;

- efficiency of investments.

As a practical field of activity, financial management has several major areas:

- general financial analysis and planning, in which the formulation of the overall financial strategy are implemented;

- management of investment activity, understood in a broad sense as an investment in the so-called real assets and investments in financial area;

- management of sources of financial resources as the area of activity of the administrative apparatus, which has the purpose of ensuring financial stability;

- financial management, which provides cost-efficient work;

- current cash management, in which financing current operations and creating cash flow are implementing. All of this have a goal to ensure the solvency of rhythm city and current payments.

In whatever field of activity of the enterprise management solution is accepted, it directly or indirectly affects the formation of cash flows and financial performance. Financial management is directly related to production management, innovation management, personnel management and some other types of functional management.

Therefore, financial management must be characterized by a high dynamism, taking into account changes in environmental factors, resource potential, forms of organization of production and operations, financial condition and other parameters of operation of the business.

No matter how effective different projects of managerial decisions in the field of financial activity may be seen in the current period, they should be rejected if they conflict with the mission of (the main purpose of the activity) company and the strategic directions of its development.

Effective financial management allows to provide steady growth of equity, significantly improve its competitive position in the commodity and financial markets, to ensure stable economic development in the long term [5, p. 89].

The development of market relations led to increasing role of company finance. Condition of financial resources of the enterprise becomes a factor, which determines financial performance and as a consequence the maintenance of its competitiveness.

The opportunities in online fundraising and the attractiveness of the company to outside investors should be recognized as the main undeniable competitive advantage in the financial sector. The concept of "quality of financial management" has a great importance. This is primarily a strategic competitive advantage in the capital market. They can be estimated by availability of capital, the mutual attraction of the securities, and the desire for financial cooperation.

At the same time, the quality of financial management largely determines the overall quality of management within the enterprise. Rightly Yu Geronimus said, pointing out that "the quality of management is characterized by how quickly the desired state of the control object comes and how stable it is held in this state. Management may be bad both because of the fact that the control signals are incorrect (impel the object to move in an undesirable state) or delayed, and because of the immunity of the control object to the control signals". Financial management is based on the concept of ensuring profitability.

Therefore, the financial management of the enterprise gains paramount importance in the present conditions, because the companies with an effective system of financial management will be able to maximize their market efforts and offer its services to the market and get for their implementation the highest possible price, which allows fully recoup all costs, and significantly improve the efficiency of internal and external position of competitiveness [4, p. 52].

Creation of an effective financial management is the primary task of the company's management, as the profitability and competitiveness of business depend on its successful solution.

Thus, the requirements of modern market relations stimulate the activity of the company, aimed at preserving financial stability, increasing market value, to create the conditions of competitiveness, encourage them to operate with a view to the global market, thanks to an integrated approach to the study of theoretical and methodological aspects of financial management and the need to and the feasibility of its use as a comprehensive, efficient financial management system independent economic units confirmed many years of experience of enterprises of different countries.

Only effective traffic management of its financial resources (capital) can provide competitiveness to any economic entity, using the methodology, methods, techniques of financial management, which is achieved through a system of financial management of the enterprise.

The strategic goal of financial management is to maximize the welfare of the owners of the company, which is expressed in the maximization of the market value of the company (for shareholders - to maximize market share price), profit maximization. This approach is based on the following basic idea of the development of society - the achievement of social and economic prosperity of society through private property.

A detailed examination of these questions leads to the conclusion that the financial instruments of increasing the competitiveness of enterprises play a major role in the field of competitiveness. Positive results in improving the company's competitiveness cannot be achieved without a clearly articulated strategy of financial management, developed financial policies, the use of effective financial planning, efficient management of financial resources, taking into account risk, detailed analysis and monitoring of the Company's financial results.

RESOURCES

1. Irvin D. Financial Management. Trans. from English. - M.: "Finance and Statistics", 2010. - 270 p.

2. Bernstein L. Financial management: theory, practice and interpretation. - M.: "Finance and Statistics", 2013. – 560 p.

3. Kovalev V.V. Introduction to financial management. - M.: "Finance and Statistics", 2012. - 560 c.

4. Nikolaeva T.P. Finance companies: Teaching Complex. - M.: Publishing House. EOI center. 2015. - 311 p.

5. Peshanskaya I.V. Financial management: short-term fiscal policy: a textbook for high schools. - M.: Publishing House "Exam", 2014. - 256 p.



Table of contents: The Kazakh-American Free University Academic Journal №7 - 2015

  
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