In a business enterprise, finance is the connecting link of all the functional areas such as production, personnel and marketing, so the management of finance is vital to the smooth performance of the organization. The basic financial operations are investment, which deals with acquisition of fixed assets; financing, which deals with raising required funds from various sources; and profit appropriation, which deals with appropriating the profit earned by the enterprise among the suppliers of funds.
Regarding investment, assets/ projects are to be selected only by considering their net returns. Regarding financing, it is to be ensured that the firm gets the required financing at the lowest possible cost. Similarly, regarding profit appropriation it is to be seen that sufficient funds are provided for the developmental activities of the enterprise, without impairing the interest of the suppliers. In a firm where these operations are planned and controlled properly it can be said that there exists efficient investment management. Thus, investment management may be defined as that part of managerial activity which is concerned with the planning and controlling of the financial resources of a firm.
As every business activity requires investments, investment management is closely related with other areas of management. When investment is managed properly, other areas will also show good performance. Investment management helps in monitoring the effective deployment of funds in fixed and working capital. This will, in turn, ensure better working of the enterprise.
All the operations and resources in a business organization are managed with the same broad objective, i.e., to attain the objective of the enterprise. So each resource or area should be managed in such a way as to contribute to the fulfillment of the objective of enterprise. However, there are specific objectives for each functional area. In the case of investment, the objective is to ensure that the firm obtains the required finance at the lowest possible cost, and uses it in the maximum beneficial way. |
