The principles of financial management serve as guidelines for making sound financial decisions. They help organizations and individuals manage resources efficiently, ensuring stability, profitability, and growth.
Here are the key principles:
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Consistency – Financial policies and practices should be consistent over time to maintain stability and reliability.
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Accountability – Every financial transaction must be tracked and justified, ensuring transparency and responsibility.
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Transparency – Financial information should be clear, accurate, and accessible to relevant stakeholders.
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Viability – Organizations must ensure that expenses do not exceed revenues to maintain financial sustainability.
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Integrity – Ethical financial practices are crucial for building trust and avoiding fraud or mismanagement.
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Management and Control – Financial activities should be monitored to ensure efficiency and prevent losses.
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Liquidity – Ensuring there is enough cash or easily convertible assets to cover short-term obligations.
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Profitability – Businesses must aim to generate a reasonable return on investment while managing costs effectively.
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Risk Management – Identifying, assessing, and mitigating financial risks is essential to protect assets and ensure stability.
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Investment Efficiency – Funds should be allocated wisely to maximize returns and support long-term goals.
By following these principles, individuals and organizations can ensure financial health, stability, and growth.
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