Role of the Financial Manager The role of the financial manager has changed drastically during recent years. Previously, financial managers were seen as the stewards of the organization, since they were responsible to ensure the accountability of all organizational assets and to generate accurate financial reports. Today, their main goal is to maximize shareholder value. In order to achieve this goal, they have to be information managers, cost managers, controllers, consultants, and risk managers. However, there are critics that disagree with this shareholder value approach. Instead, in order to ensure long-term sustainability, financial managers should be focusing on the stakeholder value.
Financial manager 's role
Traditional
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Financial managers, therefore, must implement proper risk management by identifying all potential risks, determining of their financial impact, and making proper decisions regarding each risk. (Bozzo, 1998)
According to Lowell Johnson (Anonymous, 2004), financial managers must also have the capabilities to "Create" through creating capital, managing daily cash flow, and maximizing return, thus increasing the organization 's ability to borrow money when needed.
Maximizing share value opinion Maximizing shareholder value has become a prominent objective for many financial managers. It seems that more and more corporations are only focusing in increasing shareholder value. According to George, CEO of Medtronic, this practice is both short-term and shortsighted. The shareholder value strategy forces financial managers to focus their effort and strategies in meeting quarterly earnings expectations. This strategy is financially driven, which does not make room for differentiating factors in business competition and employee motivations. In George 's opinion, this strategy will soon lose its competitive advantage. Instead of shareholder value maximization, George believes that it would be more beneficial to the organization in the long run to focus in meeting the needs of all stakeholders: shareholders, customers, and employees. Organizations should put
The financial management aspect focus on providing the necessary information to the stockholders, stakeholders, and creditors are outside the business. Financial management generates reports and statistics about the business financial health and well being. The financial management enables stockholders to view his or her investments and see how well the investment in progressing. The financial management tools also give future stockholders the opportunity to make future decisions.
The financial mangers goal is acquisition, financing, and management of assets. The challenges are investment, financing, and asset management decisions.
Corporate finance is important to all managers because it provides managers the skills needed to identify and select the corporate strategies and individual projects that add value to their firm and forecast the funding requirements of their company and devise strategies for acquiring those funds.
Financial Management is an important aspect of how a business operates efficiently. The way that the finances are controlled can determine how successful the company is. The finances of a business allows for the growth of the company. The five practices of financial management: capital structure decision, investment appraisal techniques, dividend policy, working capital management and financial performance assessment are critical when assessing a company. The performance of a company plays a key role on how successful the company is on meeting goals. There are different strategies and tools that a company can implement and if they are used to effectively the company can meet their goals. If a company has good finances, a good
Financial Management: “The process for and the analysis of making financial decisions in the business context.” (Cornett, Adair, & Nofsinger, 2016, p. 5).
Corporate finance is important to all managers because it allows a manager to be able to predict the funds the company will need for their upcoming projects and think about ways to organize and acquire those funds.
Describe the duties of the financial manager in a business firm. Financial managers measure the firm's performance,
The primary role of finance is to plan for, acquire, and use resources to maximize the efficiency and value of the enterprise.
Over the years, firms have increasingly been maximising shareholder value. However, Steve Denning, a former director of the World Bank, author of six leadership and management books and columnist for Forbes, disagrees. His article “The Origin of the ‘World’s Dumbest Idea’: Milton Friedman”, was published on June 26, 2013 on Forbes, debates against Friedman’s argument that the social responsibility of corporations is to make money for its shareholders. The main issue here is whether the maximisation of shareholder value as the guiding principle of executives is detrimental to the corporation. Although Denning has exhibited valid points in his argument, his lack of citation, biased view on most arguments and his tone has dampened the credibility
A company has to find a way to achieve a balance between rewarding managers to the point that it is detrimental to the company and finding a way to maximize the wealth of the shareholders.
The financial perspective uses financial performance measures to determine whether the organization’s strategy and actions are profitable. An organization’s financial goals may be as simple as: to survive, to succeed, and to prosper. Survival can be measured by cash flow, success can be measured by growth in sales and income, and prosperity can be measured by increased market share and return on equity. Managers are encouraged to use financial measures like these to demonstrate their financial position to shareholders. (Kaplan and Norton
To maximize shareholder value through a systematic, disciplined, reliable, ethical, and ongoing process of supply of goods or services.
However the author emphasizes that the issue actually is the other way around that the shareholder value principle has not betrayed the management rather it is the management that has betrayed the principle. In basic, delivering value to the shareholders means that the organization has been able to grow the earnings, the dividends of the organization and the share price. Thus in analyzing the delivery of shareholder value by Wal-Mart these three elements will be focused upon.
The start of this comparable analysis will be on value creation for their shareholders, a primary role of a financial manager. In general, increasing sales, earnings, and using those earnings wisely are the major ways to increase this value over time. With that in mind, the value can be compared over time using the three
This is the first pace in financial. It is the duty of financial manager to primarily recognize the goals of the company. The subsequently responsibility is to decide on the suitable steps that have to be applied achieve the goals of the company (Baker and Baker, 2007, p. 6).