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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