Role of Financial Manages
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Role of Financial Managers
Jesus G. Covarrubias
University of Phoenix
October 15, 2005
Table of Contents
Page
Introduction
Financial Manager Duties
Maximizing Shareholder Value
Financial Responsibility
Financial Markets
Investor Trust
Conclusion
References
Introduction
This paper focuses on identifying the major duties of Financial Managers and their role in maximizing shareholder value within todays financial markets. A comparison between a Financial Managers viewpoint and that of stockholders with related to maximizing share value will be discussed.
Financial Manager Duties
Almost every business, government agency, and organization has one or more financial managers who handle the preparation of financial reports, investment activities, and routinely implement cash management strategies. Financial managers also spend time developing strategies and implementing long-term goals for their organizations often intended to maximize shareholder value.
The basic duties of financial managers vary with their specific titles, which include controller, treasurer or finance officer, credit manager, cash manager, and risk and insurance manager. Controllers direct the preparation of financial reports that summarize and forecast the organization’s financial position, such as income statements, balance sheets, and analyses of future earnings or expenses. Controllers also are in charge of preparing special reports required by regulatory authorities. Often, controllers oversee the accounting, audit, and budget departments.
Treasurers and finance officers direct the organization’s financial goals, objectives, and budgets. They oversee the investment of funds and manage associated risks, supervise cash management activities, execute capital-raising strategies to support a firm’s expansion, and deal with mergers and acquisitions. Credit managers oversee the firm’s issuance of credit. They establish credit-rating criteria, determine credit ceilings, and monitor the collections of past-due accounts. Managers specializing in international finance develop financial and accounting systems for the banking transactions of multinational organizations.
Maximizing Shareholder Value
Financial managers try to build shareholder value by strategically planning and integrating financing and investment decisions. The process requires financial managers to fully understand a number of financial concepts. Managers must make the best use of corporate policies and practices involving capital structures, cost of capital, diversification, risks, capital budgeting, financial policy, and how to earn the minimum acceptable rate of return on an investment. They must also understand how to make decisions that create economic value and how to evaluate the financial consequences of their decisions.
Maximizing shareholder value is typically related to a company’s investment strategies. Such investment strategies are driven by the need to build value for investors through creating sustained profitable growth, maintaining a disciplined approach to decision making, building upon the financial health of the company and fostering a culture of integrity and transparency (Powell, D. CFO Cysco Systems Inc.)
Financial Responsibility
Financial managers must understand that their decisions can result in having their companies held accountable to everyone with a stake in its success. (Financial Mangers. U.S. Department of Labor). Responsible financial managers endeavor to establish a foundation of investor confidence that begins with the integrity of financial reporting and conservative accounting. Building on that foundation, financial managers design investment strategies to generate sustained profitable growth by using a company’s financial strength and making deliberate investment decisions that will ultimately create additional value for shareholders. Furthermore, financial managers must recognize that satisfying the needs