Characteristics of financial management:

1. Branch of management: Financial management is a branch of management. It includes the function of planning and control for the use of finance.

2. Wide scope:

• The scope of financial management is extremely wide. Its scope includes estimating the need of finance, acquiring finance, maximum utilization, proper allocation and its planning and controlling.
• It covers all financial operations, right from the inception of business.

3. Base of the managerial decisions:

• Financial management is the base for managerial decisions.
• All major decisions regarding production, sales, research, development, etc. are based on financial management.

4. Relation with financial decisions:

• Financial management is also related with taking financial decisions.
• Financial decisions such as new investment, capital structure, dividend policy, etc. are all associated with financial management.
• Financial management makes use of modern mathematical techniques for taking financial decisions.

5. Goal of maximization of owner’s economic welfare:

Financial management aims at maximizing economic welfare of the business owner. For this, it works with two approaches: (i) Profit maximization and (ii) Wealth maximization.

6. Key position: Financial management holds key position in organizational structure of business unit.

7. Relation with other areas of management:

• If there is sufficient finance and proper financial management then the financial management will be more flexible in formulating policies related to production, sales, incentives, etc.
• On this basis we can say that financial management is related with different areas of management such as production management, marketing management, personnel management, etc.

8. Division into two parts:

• Financial management can be divided mainly into two parts namely
  1. Management of long term fixed capital and
  2. Management of working capital.
• Fixed capital management includes planning for expansion of fixed assets such as building, machines, land, etc., while working capital management takes care of day-to-day expenses.