The role of financial management in enhancing the competitiveness of the company
Table of contents: The Kazakh-American Free University Academic Journal №8 - 2016
Authors: Urazova Natalya, Kazakh-American free university, Kazakhstan
Litvinenko Victoriya, Ust-Kamenogorsk branch of Plekhanov Russian University of Economics,
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.
2. Bernstein L.
Financial management: theory, practice and interpretation. - M .: "Finance
and Statistics", 2013.
3. Kovalev VV
Introduction to financial management. - M.: "Finance and Statistics",
2012.
4. Nikolaeva TP Finance
companies: Teaching Complex. - M .: Publishing House. EOI center, 2015.
5. Peshanskaya, IV Financial management:
short-term fiscal policy: a textbook for high schools. - M .: Publishing House
"Exam", 2014.
Table of contents: The Kazakh-American Free University Academic Journal №8 - 2016
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