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How the financial Manager can help out to increase the wealth of stake holders How financial manager can can Improve the financial policies of any company Before start this topic please keep few things in your mind that the FM can play vital role in development of any organization because fm is basically controlling the finance her is my model that can help you to understand A brief history about the role of a financial manager A brief history about the role of a financial manager Until around the first half of the 1900s, financial managers primarily raised funds and managed their firm’s cash positions As the scale of the firm is on the rising, money is always in great need. In the 1950s, the increasing acceptance of present value concept encouraged financial managers to expand their responsibilities and to become concerned with the selection of capital investment projects
which requires investments in plant. finance is required to play an even more vital strategic role within the corporation Case: Kelon Financial Failure: Expand too rapidly. exhaust all its resources with slow return How the financial Manager can help out to increase the wealth of stake holders Forecasting and Planning: The financial manager must interact with other executives as they look ahead and lay the plans which will shape the firm’s future Major Investment and Financing Decisions A successful firm usually has rapid growth in sales. and all managers---financial and otherwise---need to take this into account Dealing with the financial markets The firm’s securities are traded in the financial markets Financial markets offers opportunities for the firm . The financial manager must help decide the optimal sales growth rate.Why? The severe competition has rendered some project to low level of profit. and inventory. even spell loss to firms Today.and he or she must help decide what specific assets to acquire and the best way to finance those assets Coordination and control The financial manager must interact with other executives to ensure that the firm is operated asefficiently as possible.equipment. external factors have an increasing impact on the financial manager. All business decisions have financial implications. As a result.
including identifying the risks that should be hedged andhedging them in the most efficient manner What is FM? What is FM? Why we need FM? How to use funds to maximize the value of the firm with limited resource. financing and management of assets with some overall goals in mind Acquisition of assets---investment decision Two problems to be solved: how much dollar of amount is needed and what is the composition of these assets The investment decision is the most important of the firm’s three major decisions when it comes to value creation The value creation of the firm is determined to a great extent by the investment decisions. The financial manager is usually responsible for the firm’soverall risk management program. (2)FM is concerned with the acquisition.Useful information Risk management All businesses face risks. compared to the financing and assets management Case of Jiuyao Corporation Financing decision: concerned with the problem of raising money to meet the need of investment decision . many of these risks can be reduced by purchasing insurance orby hedging in the derivatives markets. however. It is not a problem of manufacturing efficiency and minimizing cost.
for speeding up asset turnover can increasing the profit level in a certain period What do others say about FM? What do others say about FM? CPA Examination Textbook CPA Examination Textbook FM is a management job concerning the raising. planning and controlling How the financial Manager can help out to increase the wealth of stake holders 2 The Goal of the Firm The Goal of the Firm Why do we need a goal? Because judgment as to whether or not a financial decision is efficient must be made in light of some standards Role of Financial Financial Managers Nature of the Work Training. using and distributing of funds The object of FM is the recycle and turnover of cash The main contents of FM is financing. branch managers in banks. investment.Financing decision is also very important: it concerns with capital cost. Experience may be more important than formal education for some financial manager positions— most notably. and dividend distribution The main function of FM is deciding. investment opportunities. About 3 out of 10 work in finance and insurance industries. and fixed assets are largely determined by operation needs It is also very important. and many have a master's degree or professional certification. . why? Financial policies affect the turnover of current asset. Most financial managers need a bachelor's degree. and the existence of a firm Asset management decision The main task of asset management is how to use the acquired assets as efficiently as possible---to speed up the turnover of the asset Here financial managers are concerned more with current assets than fixed assets. and Advancement Employment Job Outlook Projections Earnings Wages Related Occupations Sources of Additional Information Significant Points Jobseekers are likely to face competition. Other Qualifications.
that summarize and forecast the organization's financial position. manage associated risks. balance sheets. Treasurers and finance officers direct their organization's budgets to meet its financial goals. Operations risk includes a wide range of risks. controllers oversee the accounting.Nature of the WorkAbout this section Almost every firm. Managers specializing in international finance develop financial and accounting systems for the banking transactions of multinational organizations. and other type of organization employs one or more financial managers. Credit managers oversee the firm's issuance of credit. direct investment activities. such as income statements. and budget departments. and monitoring the collections of past-due accounts. and implement cash management strategies. Managers also develop strategies and implement the long-term goals of their organization. Cash managers monitor and control the flow of cash receipts and disbursements to meet the business and investment needs of their firm. supervise cash management activities. Risk managers control financial risk by using hedging and other techniques to limit a company’s exposure to currency or commodity price changes. For example. such as a rogue employee damaging the company’s finances or a hurricane damaging an important factory. execute capital-raising strategies to support the firm's expansion.) . Often. Controllers also are in charge of preparing special reports required by regulatory authorities. and deal with mergers and acquisitions. They oversee the investment of funds. establishing credit-rating criteria. Controllers direct the preparation of financial reports. Financial managersoversee the preparation of financial reports. and analyses of future earnings or expenses. audit. which include Controller treasurer or finance officer credit manager cash manager risk and insurance manager and manager of international banking. (Chief financial officers and other executives are included with top executives elsewhere in the Handbook. determining credit ceilings. The duties of financial managers vary with their specific titles. government agency. cash flow projections are needed to determine whether loans must be obtained to meet cash requirements or whether surplus cash can be invested. Insurance managers decide how best to limit a company’s losses by obtaining insurance against risks such as the need to make disability payments for an employee who gets hurt on the job or costs imposed by a lawsuit against the company. Risk managers are also responsible for calculating and limiting potential operations risk. Risk and insurance managers oversee programs to minimize risks and losses that might arise from financial transactions and business operations.
savings and loan associations. credit unions. and assisting customers with account problems. Branch mangaers also are becoming more oriented toward sales and marketing. whereas healthcare financial managers must be knowledgeable about issues surrounding healthcare financing. and direct the investment of funds. operations. establishing a rapport with the community to attract business. including sales. always adhering to Federal and State laws and regulations. Financial managers increasingly are hired on a temporary basis to advise senior managers on these and other matters. government financial managers must be experts on the government appropriations and budgeting processes. Work environment. Branch managers of financial institutions administer and manage all of the functions of a branch office. and investments. Moreover. financial managers typically have direct access to state-of-the-art computer systems and information services. is changing in response to technological advances that have significantly reduced the amount of time it takes to produce financial reports. specialized knowledge to reduce risks and maximize profit. approving loans and lines of credit. Job duties may include hiring personnel. . or electronic financial services. The role of the financial manager. and mortgage and finance companies—employ additional financial managers who oversee various functions. In addition to the preceding duties. Working in comfortable offices. Financial managers play an important role in mergers and consolidations and in global expansion and related financing. financial managers now perform more data analysis that allows them to offer senior managers profit-maximizing ideas. and. as a consequence. often up to 50 or 60 per week. it is important that they have substantial knowledge about the types of products that the bank sells. Financial managers who work for financial institutions must keep abreast of the rapidly growing array of financial services and products. particularly in business. such as lending. Technological improvements have made it easier to produce financial reports.Financial institutions—such as commercial banks. financial managers must be aware of special tax laws and regulations that affect their industry. For example. They commonly work long hours. They often work on teams. Financial managers generally are required to attend meetings of financial and economic associations and may travel to visit subsidiary firms or to meet customers. acting as business advisors to top management. financial managers perform tasks unique to their organization or industry. As a result. In fact. often close to top managers and with departments that develop the financial data those managers need. trusts. or programs. These managers may solicit business. mortgages. authorize loans. some small firms contract out all their accounting and financial functions to companies that provide such services. These areas require extensive.
Bank managers often have experience as loan officers or in other sales positions. However. Training. math. Education and training. . and AdvancementAbout this section Most financial managers need a bachelor's degree. or business administration is the minimum academic preparation for financial managers. A bachelor's degree in finance.Financial managers oversee the preparation of financial reports and investment activities. finance. or economics. many employers now seek graduates with a master's degree. accounting. and business skills. Other Qualifications. and many have a master's degree or professional certification. preferably in business administration. Financial managers also need strong interpersonal. economics. These academic programs develop analytical skills and teach financial analysis methods and technology.
In addition. Many associations offer professional certification programs. (See accountants and auditorselsewhere in the Handbook for additional information on the CMA designation. changes in Federal and State laws and regulations. Banks typically fill branch manager positions by promoting experienced loan officers and other professionals who excel at their jobs. Because financial managers work extensively with various departments in their firm. and the proliferation of new and complex financial instruments. Accounting positions normally require workers to be certified public accountants (CPAs). Firms often provide opportunities for workers to broaden their . Financial managers must have excellent communication skills to explain complex financial data. and pass three difficult exams. Continuing education is required to maintain these credentials. The CMA is offered by the Institute of Management Accountants to its members who have a bachelor's degree. applying their analytical skills to business. and fulfill continuing education requirements. Certification and advancement. because these jobs involve managing people and working as part of a team to solve problems. financial managers who specialize in accounting or budgeting sometimes earn the Certified Management Accountant (CMA) designation. the CFA Institute confers the Chartered Financial Analyst designation on investment professionals who have at least a bachelor's degree. work experience. Other financial managers may enter the profession through formal management training programs offered by the company. Interpersonal skills are important problem-solvers. Candidates for financial management positions need many different skills. at least 2 years of work experience. Licensure. pass the institute's four-part examination. Many financial managers work in accounting departments. Financial managers must have knowledge of international finance because financial operations are increasingly being affected by the global economy. a broad understanding of business is essential Financial managers should be creative thinkers and Other qualifications. Financial managers may broaden their skills and exhibit their competency by attaining professional certification. Experience may be more important than formal education for some financial manager positions—most notably. a good knowledge of regulatory compliance procedures is essential. The Association for Financial Professionals confers the Certified Treasury Professional credentials to those who pass a computer-based exam and have a minimum of 2 years of relevant experience.) Continuing education is vital to financial managers. branch managers in banks . For example. Also. who must cope with the growing complexity of global trade.
Candidates . Those with extensive experience and access to sufficient capital may start their own consulting firms. often in cooperation with colleges and universities.300 jobs in 2008. experienced financial managers who display a strong grasp of the operations of various departments within their organization are prime candidates for promotion to top management positions. Because financial management is so important to efficient business operations. budget management. and assess global financial transactions. State. Employment of risk managers. ability. Job prospects. both the growth of established companies and the creation of new businesses will spur demand for financial managers. also will grow. acquisitions. credit unions. Some companies may hire financial managers on a temporary basis. financial managers may be needed to oversee the contracts. Employment of financial managers over the 2008–18 decade is expected to grow by 8 percent. Job OutlookAbout this section Employment growth for financial managers is expected is to be as fast as the average for all occupations. and information systems. raise capital. Even in these cases. such as banks. As the economy expands. mergers. banking. Although they can be found in every industry. savings institutions. Long-run demand for financial managers in the securities and commodities industry will continue to be driven by the need to handle increasingly complex financial transactions and manage a growing amount of investments. Those with a master's degree and certification will have the best opportunities. applicants will likely face keen competition for jobs. Although experience. or local government. and corporate downsizing are likely to restrict the employment growth of financial managers to some extent. Some financial managers transfer to closely related positions in other industries. corporate cash management. well-trained. Regulatory changes and the expansion and globalization of finance and companies will increase the need for financial expertise and drive job growth. Financial management. Employment of bank branch managers is expected to increase because banks are creating new branches. to see the organization through a short-term crisis or to offer suggestions for boosting profits. however. sponsor numerous national and local training programs. EmploymentAbout this section Financial managers held about 539. advancement may be accelerated by this type of special study. who assess risks for insurance and investment purposes. which is as fast as the average for all occupations. jobseekers are likely to face competition because the number of job openings is expected to be less than the number of applicants. international banking. finance companies. However. and leadership are emphasized for promotion. Other companies may contract out all accounting and financial operations. and securities dealers. financial analysis. and credit union associations. insurance carriers.knowledge and skills by encouraging them to take graduate courses and attend conferences related to their specialty. Financial managers also will be needed to handle mergers and acquisitions. As with other managerial occupations. About 7 percent worked for Federal. Many firms pay all or part of the costs for employees who successfully complete the courses. Subjects covered by training programs include accounting management. approximately 31 percent were employed by finance and insurance establishments. However. Employment change.
The middle 50 percent earned between $72.070. especially for senior-level executives. and investment products. 2008-18 Number 41. As a result. commodities. (See the Handbook statements on insurance sales agents. FOR THE LATEST WAGE INFORMATION: THE ABOVE WAGE DATA ARE FROM THE OCCUPATIONAL EMPLOYMENT STATISTICS (OES) SURVEY PROGRAM. 2018 580. Deferred compensation in the form of stock options is common. personal financial advisors. As banks expand the range of products and services they offer to include wealth management.330 in May 2008. and salary levels also can depend on the type of industry and location. STATE. derivatives. FOR THE LATEST NATIONAL. and financial services sales agents.520 110.030 and $135. like salaries. Excellent communication skills are essential because financial managers must explain and justify complex financial transactions. AND LOCAL EARNINGS DATA. An understanding of international finance. and complex financial instruments is important.280 Large organizations often pay more than small ones. of wage and salary financial managers were $99. excluding annual bonuses and stock options. Median annual wages in the industries employing the largest numbers of financial managers were: Securities and commodity contracts intermediation and brokerage Management of companies and enterprises Insurance carriers Local government Depository credit intermediation $134.500 Detailed S NOTE: Data in this table are rounded.940 115.with expertise in accounting and finance—particularly those with a master's degree or certification— should enjoy the best job prospects. and securities. UNLESS OTHERWISE NOTED. VISIT THE FOLLOWING PAGES: .750 78.) Projections DataAbout this section Projections data from the National Employment Matrix Change. 2008 539. vary substantially by size of firm. branch managers with knowledge in these areas will be needed. EarningsAbout this section Median annual wages. candidates who are licensed to sell insurance or securities will have more favorable prospects. Many financial managers in both public and private industry receive additional compensation in the form of bonuses which. insurance. See the discussion of the employment projections table in the Handbook introductory chap on Occupational Information Included in the Handbook.200 Percent 8 [PDF] Occupational Title Financial managers SOC Code 11-3031 Employment.300 Projected Employment.650 77.
com For information about the Certified in Management Accounting designation.fma. commodities. securities investment. Workers in other occupations requiring similar training and skills include: Accountants and auditors Budget analysts Financial analysts Insurance sales agents Insurance underwriters Loan officers Personal financial advisors Real estate brokers and sales agents Securities. Internet: http://www. VA 22903. such as asset management. University of South Florida. Washington. contact: Association for Financial Professionals. and financial services sales agents Sources of Additional InformationAbout this section DISCLAIMER: LINKS TO NON-BLS INTERNET SITES ARE PROVIDED FOR YOUR CONVENIENCE AND DO NOT CONSTITUTE AN ENDORSEMENT. For information about careers and certification in financial management..cfainstitute. Internet: http://www. Tampa. Internet: http://www. 4202 East Fowler Ave. Internet: http://www..org For information about the Chartered Financial Analyst program.org For information on The American Institute of Banking and its programs. NW.aba. FINANCIAL MANAGERS Related OccupationsAbout this section Financial managers combine formal education with experience in one or more areas of finance. contact: Financial Management Association International. FL 33620.. contact: Institute of Management Accountants. College of Business Administration. BSN 3331. lending. Bethesda. NJ 07645.imanet.. Internet: http://www. Suite 750. 10 Paragon Dr.org . contact: American Bankers Association. 4520 East-West Hwy. MD 20814. or insurance risk and loss control. Charlottesville. Montvale.org For information about careers in financial and treasury management and the Certified Treasury Professional program. DC 20036.afponline.. contact: CFA Institute. 1120 Connecticut Ave. credit operations. 560 Ray Hunt Dr.
Risk management 8. International financial decisions 6. 2. The manager also decides how much capital should be employed in the project and which sources are the best for financing the project. the investment decisions relate to the investment that the company makes in different projects so as to expand the business and improve its profitability. On the monthly and yearly basis the manager looks into the inventory requirements. . what should be the capital outlay of the firm. risk. what tax benefits the firm can avail by establishing and expanding into the foreign market? A finance manager thus not only acts as a person maintaining the accounts but also plays a major role in the management of portfolio. establishing of the subsidiaries and investing in the foreign markets. Dividend decisions 3. Here the finance manager looks into the profits that the business can generate from establishing the subsidiary. Thus the finance manager plays an important role in any business enterprise. The top management takes the advice of the finance manager for the capital structure outlay of the firm. and the objectives of the firm and then plans a budget accordingly for different departments so that they receive optimum amount to carry out the activities and achieve the business objectives. On the basis of the previous year budget utilization. cash and capital. Such decision also extends to the investments in the foreign and the local market which requires a thorough knowledge of the market trends thus the role becomes important. Portfolio management 7. capital budgeting decisions. daily cash requirements. and all the investment decisions of the firm. finance manager prepares a budget and allocate the recourses for the coming year.The Role of Finance Manager The role of finance manager in the company is an important one. Cash management while the dividend decisions are related to deciding the amount that is to be distributed to the shareholders. The different decisions can be classified into: 1. The finance manager here appraises the various projects and judges their profitability. Financial forecasting 5. The routine working capital and cash management decisions. capital structure outlay of the firm. Investment decisions 4. The function of the finance manager is not confined to the management and making of the accounts but it also plays a major role in dividend decisions. With globalization the role of finance manager is not confined to the regional boundaries but has spread to the activities involving taking the decisions regarding mergers and acquisitions. different reviews and study reports prepared by the research department. decision related to the merger and acquisitions.
but they are also in charge of providing the cash for the week to week operations. the cash is either reinvested or returned to the investors who contributed the money in the first place. 12 Investments can be made into anything from physical goods. if the company borrows money from the bank. There are two major decisions for the financial manager to make that greatly affect this process. The cash is employed to purchase the real assets used in the firm's operations. Encyclopedia. maybe even a combination of the two. Brealey.com explains the role of an accountant as "The accountant evaluates records drawn up by the bookkeeper and shows the results of this investigation as losses and gains. Finally. if the firm does well. the firm must of course then repay the money plus any interest accrued. or it can be invested into ideas like a marketing plan. like equipment or new products. One of the most common methods of raising money is to invite investors to put up the cash and offer them a share of the future benefits. For example. The capital budgeting decision asks how much money the company should invest and into what assets should this investment be made." (Fundamentals of Corporate Finance. Later.18) The flow of money through the financial manager is also set up by Brealey. p. 19) If the bank lends money to the firm. An investment is made with the hope that it will provide results in the future. The big ideas are a part of the financial manager's role.The role of the financial manager is central in the flow of money from investors into the firm and then back to those same investors. Myers and Marcus explain that "these pieces of paper have value because they are claims on the firm's real assets and the cash that those assets will produce. the real assets generate enough cash inflow to more than repay the initial investment. how many and how soon the benefits will start to come in from the investment. leakages. p. The manager also needs to assess and diffuse all risks that may hurt the company. Myers and Marcus. the bank has a financial asset." (Fundamentals. The company raises money by selling securities. The company's real assets need to produce enough cash to satisfy these claims. the financial manager must be aware of what kind. The repayment can be done with stock shareholding or simple cash. they are central to the success or failure of the company as a whole. . "The flow starts when financial assets are sold to raise cash. That financial asset gives it a claim to a stream of interest payments and to repayment of the loan. In fact. The financing decision determines how the cash for the investment will be raised.
Cost accounting shows the actual cost. The role of maximizing shareholder value is one that can be shared by the financial manager and accountant. Both positions should be. particularly about investment opportunities and the day-to-day operations of the organization. and they must recognize and classify all other factors that enter into the determination of the true condition of the business (e. over a certain period of time. The accountant is required to follow the rule book to an absolute and provide the most honest and reliable financial information as possible.g. The main difference between the financial manager and the accountant lies in the word "comprehensive". as any smart financial manager would consult all sources. by this system unprofitable ventures. The accounting procedures and statements are generally followed in the methodology that would best benefit the company. at least concerned with maximizing the shareholder's value and ultimately maximizing the value of the company. As with any other department in the company. The financial manager is afforded the opportunity to take risks. particularly the accountant.economies. to decide on a feasible and strong investment opportunity. receipts. departments. they must be capable of arriving at a comprehensive view of the economic and the legal aspects of a business.. and methods may be discovered. so as to reveal the progress or failures of the business and also its future limitations and possibilities. of particular services rendered or of articles produced. and present standing). fiscal changes. if not focused on. expenditures. But they are allowed to take a chance." (encyclopedia. providing information that the other needs and also being able to work together to make informed decisions. services. the accounting department plays an important part in the decision making and investment making process.com) 12 The financial manager and the accountant are very important resources for each other. or changes in value. Accountants must also be able to draw up a set of financial records and prescribe the system of accounts that will most easily give the desired information. The account information will also need to provide the most accurate and helpful information to assist the finance manager in any decisions. envisaging the effect of every sort of transaction on the profit-and-loss statement. properties and financial records representing investments. ROLE OF THE FINANCE MANAGER . That may be a bit extreme. even making decisions based on a "gut feeling". statistics or memoranda relating to production.
Today’s finance manager is well versed with the overall financial functioning of the organisation and is capable of dealing with the problems and decisions dealing with the management of the financial operations.He has to have knowledge of financial markets and financial statements in order to take financial decisions or any corrective measures. .Therefore their task are more centralised on the liquidity and profitability of the firm.During 1980′s the finance manager had a traditional role to play .According to the changing business environment the role of the financial manager has undergone a sea change.requisite skill.with the allocation of funds in various financial projects and financial activities and is less concerned with the procurement of funds and now the finance manager is more concerned if at all the funds have been properly utilised.a strong grasp on the nature and scope of all firm and financial operations and a thorough understanding of how the firm operates in averse situations and operates in a market place.The modern financial manager has very important role to -play in the effective management of the company.Hence shows how important a Finance manager is to the organisation.tact.Procurment of long term and short term capital.Therefore the role of the finance manager centres around efficient planning and control of flow of funds right from inflow to outflow of funds.prepare reports on the company’s current financial position and performance and manage cash to save the company from insolvency.intelligence and foresight in order to match the fast moving and technologically complex corporate environment.concerning the firms operation.the responsibilty totally rests with the Finance manager.Therefore the role of the finance manager is much exact.Dividend declaration.optimal use of working capital and increase in the value of firms common stock.There can be problems at times where it becomes increasingly alarming for the company to function smoothly.The financial manager is highly specialised job today .no area of management can function smoothly unless its financial aspect is sound and effectively managed.the problems can relate to: Selection of new proposals for capital investment.globalization and also with the enlargement of the size of the business.Now he is very much involved with with the total amount of capital employed by the firm .In order to tackle the functioning of this financial operations he has to have a broader range of skills.his task was mainly confined to procuring cash.undoubtably the role of Financial managers have not only become exciting but also challenging.maintain accurate records .because it entails effective and quick decision making process.However this role gradually transcended and has now changed into a gigantic task with the growing complexity in the business environment. Today.
because it entails effective and quick decision making process.Therefore the role of the finance manager centres around efficient planning and control of flow of funds right from inflow to outflow of funds.tact.no area of management can function smoothly unless its financial aspect is sound and effectively managed.requisite skill.The financial manager is highly specialised job today .Dividend declaration.intelligence and foresight in order to match the fast moving and technologically complex corporate environment.the problems can relate to: Selection of new proposals for capital investment.the responsibilty totally rests with the Finance manager.Today.There can be problems at times where it becomes increasingly alarming for the company to function smoothly.concerning the firms operation.The modern financial manager has very important role to -play in the effective management of the company.Procurment of long term and short term capital.Hence shows how important a Finance manager is to the organisation.undoubtably the role of Financial managers have not only become exciting but also challenging. .He has to have knowledge of financial markets and financial statements in order to take financial decisions or any corrective measures.optimal use of working capital and increase in the value of firms common stock.