The objective of financial management is to ensure that the return on assets (ROA) generated by a business (here, 10%) is higher than the cost of money borrowed from investorsthat is, lenders and shareholders (here, 7%).The statement of financial position has two sides. On the left, it lists the assets, such as non-current assets (e.g., cars, buildings, equipment) and current assets (e.g., inventories, trade receivables), that a business owns; on the right, it shows the money raised from investors, such as equity (shareholders), non-current liabilities (long-term borrowings), and current liabilities (line of credit). In this example, if the business invests $100,000 in assets (left side) and generates $10,000 in profit, it has earned a 10%.eturn ($10,000 $100,000). If the business borrows the $100,000 and pays $7,000 in interest for it, the cost of financing is 7% ($7,000 100,000).

The role of financial management is not limited to raising capital dollars; it also extends to finding ways to use funds more effectively within a business. It focuses on answering the following questions: How are we doing? How much cash do we have on hand? What should we spend our funds on? Where will our funds come from? How will our business be protected?