Strategic Financial Management

AAA

DEFINITION of 'Strategic Financial Management '

Managing an organization's financial resources so as to achieve its business objectives and maximize its value. Strategic financial management involves a defined sequence of steps that encompasses the full range of a company's finances, from setting out objectives and identifying resources, analyzing data and making financial decisions, to tracking the variance between actual and budgeted results and identifying the reasons for this variance. The term "strategic" means that this approach to financial management has a long-term horizon.

INVESTOPEDIA EXPLAINS 'Strategic Financial Management '

At the most fundamental level, financial management is concerned with managing an organization's assets, liabilities, revenues, profitability and cash flow. Strategic financial management goes a step further in ensuring that the organization remains on track to attain its short-term and long-term goals, while maximizing value for its shareholders.


Strategic financial management also means that short-term goals may occasionally need to be sacrificed to meet longer-term objectives. A typical example is when a loss-making company trims its asset base through factory closures or headcount reduction in order to reduce operating expenses. While such actions have a detrimental effect on near-term results because of restructuring costs and other one-time items, it positions the company to achieve profitability in the longer term.

RELATED TERMS
  1. Financial Accounting

    The process of recording, summarizing and reporting the myriad ...
  2. Accounting Records

    All of the documentation and books involved in the preparation ...
  3. Stakeholder

    A party that has an interest in an enterprise or project. The ...
  4. Managerial Accounting

    The process of identifying, measuring, analyzing, interpreting, ...
  5. Corporate Governance

    The system of rules, practices and processes by which a company ...
  6. Best Practices

    A set of guidelines, ethics or ideas that represent the most ...
RELATED FAQS
  1. What are the differences between absorption costing and variable costing?

    Absorption costing includes all costs, including fixed costs, in figuring the cost of production, while variable costing ... Read Full Answer >>
  2. What financial ratios are most useful for an investor to evaluate the liquidity of ...

    An insurance company, like any other nonfinancial company, needs access to liquidity in case it needs to fulfill its debt ... Read Full Answer >>
  3. What is the relationship between degree of operating leverage and profits?

    The degree of operating leverage directly reflects a company's cost structure, and cost structure is a significant variable ... Read Full Answer >>
  4. How does transfer pricing help business?

    Transfer pricing involves the trade of goods or services between two related companies, and both can come out the winner. ... Read Full Answer >>
  5. How do I calculate my effective tax rate using Excel?

    Your effective tax rate can be calculated using Microsoft Excel through a few standard functions and an accurate breakdown ... Read Full Answer >>
  6. How important are contingent liabilities in an audit?

    Contingent liabilities, when present, are very important audit items because they normally represent risks that are easily ... Read Full Answer >>
Related Articles
  1. Insurance

    The Challenging Role Of The Corporate Treasurer

    Corporate treasury management has evolved from an offshoot of accounting to a more specific and strategic career.
  2. Active Trading

    Competitive Advantage Counts

    What's the best indicator of a company's future success? Its ability to succeed when others fail.
  3. Professionals

    Business Grads, Land Your Dream Job

    Companies are in need of strategic candidates, not walking resumes. Find out how to set yourself apart from the pack and land the business career you've always wanted.
  4. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  5. Economics

    What's Involved in Customer Service?

    Customer service is the part of a business tasked with enhancing customer satisfaction.
  6. Economics

    What is Involved in Inventory Management?

    Inventory management refers to the theories, functions and management skills involved in controlling an inventory.
  7. Economics

    What are Noncurrent Assets?

    Noncurrent assets are property that a company owns that will last for more than one year.
  8. Investing Basics

    How Much Do CPAs Make?

    If you're considering becoming a CPA, here's what you might expect to earn.
  9. Economics

    Explaining Activity-Based Costing

    Activity-based costing (ABC) is a managerial accounting method that assigns certain indirect costs to the products incurring the bulk of those costs.
  10. Economics

    What is a Contra Account?

    A contra account is an offset that reduces the value of a related account.

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center