The Function Of The Finance Manager Is

The Function Of The Finance Manager Is – The function of financial management drives the ultimate goals of any business, which is to maximize profits and wealth. If we broadly categorize the functions of the chief financial officer of a business, they can be procurement of funds and utilization of funds. The basic objective of buying funds is to minimize the cost of funds, and the objective of using funds is to maximize returns. Let’s see more about the functions of financial management.

Below is a schematic representation of the financial functions. Excerpted from Prasath Saravana B, Padhuka’s Student’s Handbook of Cost Accounting and Financial Management.

The Function Of The Finance Manager Is

The fundraising process begins with estimating the need for funds. It carries out various forecasting exercises to identify all the future needs of the project and to know the amount needed to invest in fixed assets and working capital. He has to decide what the sources of money will be to get the funds. In addition to the number of requirements being sufficient, the financial manager must determine the timing of these requirements. Fund timing is very important in financial management because it has time value and we know that “a dollar today is not the same as a dollar a year from now”.

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After a reasonable estimate of financing, capital structure decisions will be finalized through two things viz. a) Mixing long-term finance and short-term finance 2) Mixing own funds and debt funds. Long-term funds are generally used to finance long-term requirements such as fixed assets, other long-term investments and a portion of the continuously invested working capital at any given time.

Working capital management is an important daily activity for the financial manager. It includes two broad functions, i.e. procurement and utilization of funds. It mainly involves the management of current assets and liabilities and maintains the difference between the two by managing them according to the funds the organization has. Managing money is an important task in capital management. The CFO must ensure that all branches, units, etc. have sufficient cash to cover the necessary expenses. The better you manage your money, the smoother the flow of business operations.

The dividend decision primarily involves making decisions about paying dividends to shareholders. The main concern to deal with is the determination of the dividend payout ratio, which depends on several factors, such as the company’s need for funds in its projects, the comparison of expected returns among the company’s projects, and the return to shareholders. In the general market, the stability of dividend payments, market expectations, earnings trends, tax considerations for shareholders, etc.

Investment decisions involve the use/application of funds in the right mix of projects and fixed assets to maximize the organization’s returns. Net present value, internal rate of return, payback period, etc. Various such techniques are used.

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Financial analysis is not included in financial functions, but all financial functions performed must be evaluated. This evaluation draws conclusions such as improvement and so on. Performance evaluation assesses the receipt of funds and the effectiveness of their use.

Sanjay Borad is the founder and CEO. He likes to keep things simple and easy. This blog has been running since 2009 and “attempts to explain financial management concepts in Layman’s terms”. Any company, whether it’s a small-town bakery or General Motors, needs money to operate. To make money, money must first be spent: on inventory and supplies, equipment and facilities, and employee wages and salaries. That’s why finance is critical to the success of every business. It may not be as visible as marketing or manufacturing, but financial management is just as important to a company’s success.

Financial management – the art and science of managing a company’s money to meet its goals – is not just the responsibility of the finance department. All business decisions have financial consequences. Managers of all departments should work closely with the finance staff. If you’re a sales representative, for example, a company’s credit and collection policies will affect your ability to make sales. The head of the IT department must request a new computer system or laptop.

The income from the sale of the company’s products should be the main source of income. But when it comes to paying the bills, sales don’t always make money. Financial managers must track the flow of money into and out of the company (see Exhibit 16.2). They work with managers in other departments of the company to determine how available funds will be used and how much money is needed. Then they choose the best source to get the required funds.

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For example, a financial manager will track day-to-day operational data, such as collections and payments, to ensure the company has enough cash to meet its obligations. In the long run, the manager will carefully consider whether and when the company should open a new production facility. The manager will also propose the most appropriate way to finance the project, raise funds and then monitor the implementation and operation of the project.

Financial management is closely related to the article. In most companies, both areas are the responsibility of the vice president or director of finance. But the main function of an accountant is to collect and present financial data. Financial managers use financial statements and other information prepared by accountants to make financial decisions. Financial managers focus on cash flow, income and outflows. They plan and monitor the company’s cash flow to ensure cash is available when needed.

Financial managers have a complex and difficult job. Accountants analyze the financial data prepared, analyze the financial situation of the company and prepare and implement financial plans. One day you might be developing a better way to automate fundraising and the next you might be considering an acquisition proposal. The main activities of a financial manager are:

How can financial managers make the right planning, investment and financing decisions? A financial manager’s primary goal is to maximize the value of the company to its owners

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The value of a publicly owned corporation is measured by the price of one share of its stock. The value of a private company is the price at which it can be sold.

To maximize the value of the company, the financial manager must consider both the short-term and long-term consequences of the company’s actions. Profit maximization is one approach, but it should not be the only one. Such an approach favors short-term gains over long-term goals. What if a company in a highly technical and competitive industry did not conduct research and development? In the short term, profits will be high because research and development is very expensive. But in the long run, a company may lose its ability to compete due to a lack of new products.

16.2 Show how cash flows through the business (Credit: Copyright Rice University, OpenStax, licensed under CC BY 4.0).

This is true regardless of company size or point in the life cycle. At Corning, a company founded more than 160 years ago, management believes in taking a long-term view and not managing quarterly earnings to meet Wall Street expectations. Once known to consumers primarily for kitchen products such as Corelle dinnerware and Pyrex heat-resistant glass cookware, the company is now a technology company that manufactures specialty glass and ceramic products. It is a leading supplier of Gorilla Glass, a special type of glass used for mobile device screens, including iPhones, iPads and devices running Google’s Android operating system. The company was also the inventor of optical fiber and cable for the telecommunications industry. These product lines require large investments in facilities and equipment during long research and development (R&D) cycles and when production begins.2

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It can be dangerous in the short term, but staying the course can pay off. In fact, Corning recently announced plans to develop a separate company division for Gorilla Glass, which currently accounts for more than 20 percent of the smartphone market with 20 million devices sold. In addition, its fiber optic cable business has grown and prospered as cable service providers like Verizon doubled down on upgrading their fiber optic networks in the United States. So far in 2017, Corning’s commitment to repurposing some of its technologies and developing new products has helped the company’s bottom line, with revenue up more than 16 percent in the most recent quarter.

As Corning’s situation illustrates, financial managers constantly try to balance the possibility of profit with the possibility of loss. In finance, the possibility of profit is called return; Risk is the possibility of a loss, or an investment not achieving the expected level of return. A basic principle in finance is that the higher the risk, the higher the required return.

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