Evolution of Financial Management
Financial management emerged as a distinct field of study at the turn of this century. Its evolution may be divided into three broad phases (though the demarcating lines between these phases are somewhat arbitrary): the traditional phase, the transitional phase, and the modern phase.
The traditional phase lasted for about four decades. The following were its important features:
1. The focus of financial management was mainly on certain episodic events like formation, issuance of capital, major expansion, merger, reorganization, and liquidation in the life cycle of the firm.
2. The approach was mainly descriptive and institutional. The instruments of financing, the institutions and procedures used in capital markets, and the legal aspects of financial events formed the core of financial management.
3. The outsiders point of view was dominant. Financial management was viewed mainly from the point of the investment bankers, lenders, and other outside interests.