What are the six principles of money management?

The principle of risk and return, the principle of the time value of money, the principle of cash flow, the principle of profitability and liquidity, the principles of diversity and the principle of hedging finance. The principle of risk and return indicates that investors must be aware of both risk and return, since the higher the risk, the higher the rates of return and the lower the risk, the lower the rates of return. For business finance, we need to compare profitability with risk. To ensure optimal rates of return, investors must measure risk and return using direct and relative measurements.

The cash flow principle mainly relates to cash inflows and outflows, and it is preferable for investors to deposit more money in the previous period than in a subsequent cash flow. This principle also follows the principle of time value, so it prefers more benefits rather than benefits from later years. The principle of profitability and liquidity is very important from the investor's perspective because the investor must guarantee both profitability and liquidity. Liquidity indicates the marketability of the investment, that is, the ease with which cash is obtained by selling the investment.

On the other hand, investors must invest in a way that can ensure that profits are maximized with a moderate or lower level of risk. It's best for a qualified accountant to overlook this to ensure that all tax obligations are met. The hedging principle tells us that we have to apply for a loan from the right sources, for short-term funding requirements we have to finance with short-term sources and, for the long-term funding requirement, we have to manage funds from long-term sources. Because the financing of fixed assets must be made from long-term sources.

A form of loan that gives the customer the opportunity to obtain something with the promise of repaying it in the future. Increasing the amount of money you save when times are good can help you manage the cost impact of protecting yourself from obstacles along the way, making sure that unexpected financial exposure doesn't ruin your long-term goals or your family's financial security.