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Limitations of Financial Management

Byadmin

Aug 23, 2022

 Financial management is proving to be very useful for business organizations in the modern era. Due to its development, there has been a lot of improvement in the management and performance of the institutions, yet it has to face many difficulties. This has reduced the usefulness of financial management. Its limitations are based on the following :- 

(i) accounting records, various information used in financial management are obtained from cost accounting, financial accounting and other documents. The analysis and interpretation of financial statements made in financial management are done through techniques like cost-quantity-benefit analysis, budgetary control etc. If these information are true and correct, then the decisions taken on the basis of these are also correct. Decisions taken when the information is wrong also turn out to be wrong. 

 (ii) Lack of knowledge of related subjects: Financial management is related to economics, statistics and mathematics and management etc. The financial manager should have sufficient knowledge of all these subjects, only then he can do financial management in the right way, but it seems very difficult for a person to have knowledge of all these subjects. 

 (iii) Lack of objectivity Financial management is completely subjective. The decisions taken by the financial manager are influenced by his own prejudices, views and opinions, which can be harmful to the organization at any time. Therefore, the success of financial management depends upon the understanding, knowledge and ability of the financial manager to obtain cooperation. 

 (iv) Developing stage Financial management is still in a developing stage. With the development, the parameters of financial management are constantly changing. 

 (v) Expensive Method: This is an expensive method for small business organizations. For financial management, there is a need for detailed organization and rules and bye-laws in the organization. 

 (vi) Not having the option of administration, financial management gives information about the financial position, performance analyzed position of the departments of the institution, but the right to take decisions is in the hands of the management and not the financial manager.

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