CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Companies use Financial Management Practice techniques to assess their operations. These include budgeting, variance analysis and breakeven analysis. These methods help organizations to plan, direct and control operating costs and to achieve profitability and performance. It is recognized that financial management practices are important to the success of the organization (Obasi, 2008). Financial management practice is the application of appropriate techniques and concepts in processing the historical and projected economic data of an entity to assist management in establishing a plan for reasonable economic objectives and in the making of rational decisions with a view towards achieving these objectives.
Financial managerial practice is a set of practices and techniques aimed at providing organizations with financial information to help them make decisions and maintain effective control over corporate resources. These include the methods and concepts necessary for effective planning, decision making (choosing among alternative business actions and controlling through the evaluation and interpretation of performance (Ikeagwu, 2010).
According to Osuala, (2005), financial management practice helps an organization to survive in the competitive, ever-changing world, because it provides an important competitive advantage for an organization that guides managerial action, motivates behaviors, supports and creates the cultural values necessary to achieve an organization’s strategic objectives.
Financial management practice is concerned primarily with the internal needs of management. It is oriented toward evaluation of performance and development of estimates of the future as opposed to traditional financial accounting which emphasizes historical data related to such legal financial matters as ownership, investment, credit granting, taxation, regulation, and the building of foundations for consistent and conservative external reporting, “in accordance with generally accepted accounting principles.” Flexibility is an essential characteristic of financial management practice since it presupposes that careful attention has been given to determine the important needs of management, many of which cannot be precisely identified in advance (Lawrence, 2009).
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