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CHAPTER II LITERATURE REVIEW
A. Financial Management
1. Definition of Financial Management
According to James C. van Home in Kasmir, 2010: 5, financial Management defined as all the activities that related with receiving, funding,
managing the assets by several purposes. This definition shows that financial management is related to how to get the fund for paying its business, how
manage the fund so that the goal of company can be reached, and how the company manage the assets effectively and efficient. Financial management
also can be defined as an art and science for managing money which contains of process, institution, market, and instrument related to money transfer among
individual, business, and government Brigham in Kasmir, 2010: 22.
2. Financial Management Scope
The scope of financial management is defined into two categories, those are Kasmir, 2010: 7-8:
a. Financial Service Financial field relates to design making and product consultation both to
individual, business, and government such as: Loan officers, Broker, and Financial Consultant.
b. Managerial Finance The activities relate to the task of financial manager in managing the
company’s fund such as: budget arrangement, financial forecast, cash
9 management, credit administration, searching the fund and doing
investment.
3. The Function of Financial Manager
According to Fred in Kasmir, 2010: 16, the functions of financial manager are planning, searching, and using the fund to maximize the value of
company, in other words, the activities related with decision of source and fund allocation.
The functions of financial manager are also defined as follows Pearson, 2011: 9:
a. Making investment decisions capital budgeting decisions. b. Making decisions on how to finance these investments capital structure
decisions. c.
Managing funding for the company’s day-to-day operations working capital management.
B. FINANCIAL RATIOS 1.
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