What Do Financial Managers Do

What Do Financial Managers Do?
The financial managers plays a vital role in the business enterprises goalsetting, policy determination, and financial success.
The financial managers responsibilities include:
Financial analysis and planning- determining the amount of funds

the business enterprise needs; a large business enterprise seeking a
rapid growth rate will require more funds.
Making investment decisions- allocating funds to specific assets
(things owned by the business enterprises). The financial manager
make decisions regarding the mix and type of assets acquired and the
possible modification or replacement of assets, particularly when
assets are in efficient or obsolete.
Making financing and capital structure decisions- raising funds in
favourable terms i.e., at a lower interest rate or with few restrictions.
Deciding how to raise funds depends on many factors, including
interest rate, cash position, and existing debt level; for example a
business enterprise with a cash-flow problem may be better off using
long-term financing.
Managing financial resource- managing cash, receivables, and
inventory to accomplish higher returns without undue risk.
Managing risks- protecting assets by buying insurance or by
hedging.
The financial managers affects shareholder wealth maximization by

influencing;
1. Current and future earnings per share (EPS), equal to net income
divided by the ordinary shares outstanding.
2. Timing, duration, and risks earnings;
3. Dividend policy; and
4. Manner of financing.
Table 1.2 presents the function of the financial manager as defined by the
Financial Executives Institutes. A national organization of financial managers.
Table 1.2
Function of the financial manager as defined by the Financial
Executives Institutes
A. Planning
Long-and short-range financial and corporate planning
Budgeting for operation and capital expenditures
Evaluating performance
Pricing policies and sales forecasting
Analysing economic factors
Appraising acquisitions and divestment
B. Provision of Capital
Short-term source; cost and arrangement
Long-term source; cost and arrangement
International generation
C. Administration of Funds
Cash management
Banking arrangement
Receipt custody, and disbursement of business enterprises securities
monies
Credit and collection management
Pension monies management
Investment portfolio management
D. Accounting and Control
Establishing accounting policies
Developing and reporting accounting data
Cost accounting
Internal auditing
Systems and procedure
Government reporting
Reporting and Interpreting results of operation to management
Comparing performance with operating plans and standards
E. Protection of assets
Providing of insurance
Establishing sounds internal controls
F. Tax Administration
Establishing tax policies and procedures

Preparing tax reports and Tax planning
G. Investor Relation
Maintaining liaison with the investment community
Counselling with analyst-public financial information
H. Evaluation of consulting
Consulting with and advising other corporate executives on business
enterprise policies, operations, and objectives and their effectiveness
I. Management Information Systems
Development and use of computerized facilities
Development and use of management information systems
Development and use of systems and procedures
Note: The size of the business enterprise and the capabilities of the
various member of management determine how these responsibilities
will be assigned.
1.8 CONTROLLER VERSUS TREASURER
In a large business enterprise, the financial responsibilities are
probably conducted by the controller, treasurer, and chief financial
officer (financial vice-president). The activities of the controller and
treasurer fall under the umbrella of finance.
There is no definite distinction between the job of the controller and
treasurer, and the function may differ slightly between organizations
because of business enterprise policy and personality of the office
holder.
The controllers function are primarily of an internal nature and include
record keeping, tracking, and controlling the financial effects of prior
and current operations. The internal matters of importance to the
controller include financial and managerial accounting, taxes, control
and audit functions. The controllers is the chief accountant is involved
in the preparation of financial statement, tax returns, the annual
report, and Securities and Exchange Commission (SEC) fillings. The
controllers function is primarily assuring that funds are used efficiently.
He or she is primarily concerned with collecting and presenting
financial information.
The controller usually look at what has occurred rather than what
should or will happen.
Many controllers are involved with management information systems

and review previous, current, and emerging patterns. They reports
their analysis of financial implications of decisions to top management.
The treasurers function, in contrast, is primarily external. The
treasurer obtains and manages the corporations capital and is
involved with creditors (e.g. Bank loan officers), shareholders, and
investors, underwriters of equity (share capital) and bond issuances
and governmental regulatory bodies (e.g. the SEC) the treasurer is
responsible for managing corporate assets (e.g. accounts receivable,
inventory) and debt, planning the finances and capital expenditures,
obtaining funds, formulating credit policy, and managing the
investment portfolio.
The treasurer concentrates on keeping the business enterprise afloat
by obtaining cash to meet obligations and buying assets to attain
corporate objectives. While the controller concentrates on profitability,
the treasurer emphasizes cash flow. Even though the business
enterprise has been profitable, it may have significant negative cash
flow, even a profitable business enterprise my fail. By emphasizing
cash flow. The treasurer strives to prevent bankruptcy and achieve
corporate goals. The treasures analyses the financial statements,
formulates additional data, and makes decisions based on the analysis;
The major responsibilities of controllers and treasurers are shown in
table 1.3
Table 1.3
RESPONSIBILITIES OF CONTROLLERS AND TREASURER
CONTROLLER
TREASURER
Accounting
Reporting financial information
Custody of records
Interpreting financial data
Budgeting
Controlling Operation
Appraising results and making
recommendations
Preparing taxes
Managing assets
Internal auditing
Obtain financing
Maintaining banking relationship
Investing Funds
Investors relation
Managing cash
Insuring assets
Fostering relationship with
creditor and investors
Appraising credit and collecting
funds
Protecting assets
Reporting to government bodies
payroll
Deciding on the financing mix

Disbursing dividends
Managing pension funds
The chief financial officers (financial vice-president) is involved with

financial policy making and planning. He or she has financial and
managerial responsibilities, supervised all phases of financial activity,
and serve as the financial adviser to the board of directors.
Figure 1.1 shoes an organization chart of the finance structure within a
business enterprise. Note that the controller and treasurer report to the
vice-president of finance.
1.9 RELATIONSHIP BETWEEN ACCOUNTING AND FINANCE

Accounting and finance have different focuses. The primary distinctions between
accounting and finance involve the treatment of funds and decsion making.
Accounting is necessary sub function of finance.
The control features of the finance function are reffred to as management
accounting. Managerial accounting includes the preparation of reports used by
management for internal decision making, such as budgeting, costing, pricing,
capital budgeting, performance evaluation, break-even analysis, transfer pricing
(pricing of goods or services transferred between departments), and rate-of-return
analysis. Managerial accounting dependds heavily on historical data obtained as
part of financial accounting function. But Managerial accounting, unlike financial
accounting, is future-oriented and emphasizes making the rigth decisions today to
ensures future performance.
Managerial accounting information is important

What Do Financial Managers Do

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What Do Financial Managers Do?

The financial managers responsibilities include:

Financial analysis and planning- determining the amount of funds

The financial managers affects shareholder wealth maximization by

Establishing tax policies and procedures

Many controllers are involved with management information systems

Deciding on the financing mix

The chief financial officers (financial vice-president) is involved with

1.9 RELATIONSHIP BETWEEN ACCOUNTING AND FINANCE

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