(iii) modernisation and expansion of business. Management of cash and other current assets is an important task of financial manager. Business firms require capital for: (ii) meeting working capital requirements, and. 18. Risk: More risk is associated with borrowed fund as compared to owner’s fund securities. The functions of Financial Manager are discussed below: This is the foremost function of the financial manager. Cash Flow Position: There are four main financial decisions- Capital Budgeting or Long term Investment decision (Application of funds), Capital Structure or Financing decision (Procurement of funds), Dividend decision (Distribution of funds) and Working Capital Management Decision in order to accomplish goal of the firm viz., to maximize shareholder’s (owner’s) wealth. Report a Violation. For this, financial manager has to determine the proper mix of equity and debt and short-term and long-term debt ratio. Thus all decisions involve management of funds under the purview of the finance manager. The financial manager must lay emphasis on financial planning as well. It is the basic function of management. The article will help in understanding each Finance Function in detail. The twin aspects, procurement and effective utilization of funds are crucial tasks faced by a finance manager.The financial manager is required to look into the financial implications of any decision in the firm. A financial manager conducts some activity like financial planning, organizing, directing and controlling organizational funds. Role of a Financial Manager Financial activities of a firm is one of the most important and complex activities of a firm. He is to record various happenings in monetary terms to ensure that assets, liabilities, incomes and expenses are properly grouped, classified and disclosed in the financial statements. The financial manager has to decide how much to retain for ploughing back and how much to distribute as dividend to shareholders out of the profits of the company. The management can raise finance from various sources like equity shareholders, preference shareholders, debenture- holders, banks and other financial institutions, public deposits, etc. … Finance manager skills are those that help individuals in this role oversee all aspects of a company's financial transactions, including budget analysis and calculation of return on investment (ROI) as well as purchasing and staffing decisions. Determining asset-management policies: All finance functions are concerned with the control of both cash flows and non-cash assets. Disposal of Profits or Surplus 7. An administration has to take countless decisions in the lifetime of the company. He may not, be concerned with the decisions, that do not affect the basic financial management and structure. The responsibilities / key functions of a financial manager are as follows: Planning, Organizing, Controlling, Financial Planning, Financial Forecasting, Financial Engineering etc. Ans: Introduction. There are many theories around financial management: Sufficient funds must be available for purchase of materials, payment of wages and meeting day-to-day expenses. 2. It involves forecasting the cash inflows and outflows to ensure that there is neither shortage nor surplus of cash with the firm. Financial managers use financial statements and other information prepared by accountants to make financial decisions. Before the actual procurement of funds, the finance manager has to decide the sources from which the funds are to be raised. There are maily 4 Finance Functions - Investment Decision, Financial Decision, Dividend Decision and Liquidity Decision. The financial manager makes estimates of funds required for both short-term and long-term. The financial manager needs to create a master budget that’s tied to the compan… The financial manager is required to look into the financial implications of any decision in the firm. The overall measure of evaluation is Return on Investment (ROI). Dividend Decision: The third major financial decision relates to the disbursement of profits back to … Investment Decision: It is the decision for creation of assets to earn income. The finance manager is also responsible for keep the company's management up to data with any serious fluctuations in finance that may have an effect on the company's budget. Finance managers are generally in charge of overseeing a team of financial consultants who monitor spending reports, wages and expense accounts for different departments. Once the requirement of capital funds has been determined, a decision regarding the kind and proportion of various sources of funds has to be taken. It is an exercise in problem solving & decision making… Plagiarism Prevention 4. Financial managers work in many places, including banks and insurance companies. The cost of raising finance from various sources is different and finance managers always prefer the source with minimum cost. Sources to raise funds. Until around the first half of the 1900s, financial managers primarily raised funds and managed their firm’s cash positions and that was pretty much it. Financial Management Functions. Financial manager is the individual who performs the financial management in the firm. Financial managers are responsible for the financial health of an organization. Privacy Policy 8. Your email address will not be published. The decisions related to money are called ‘Financing Decisions.’ Ther… The procurement of funds is dependent not only upon cost of raising funds but also on other factors like general market conditions, choice of investors, government policy, etc. They are there to ensure that everything concerning finances within a company is in order. TOS 7. This department has numerous functions such as: Calculating the capital required: The financial manager has to calculate the amount of funds an organisation requires. 6 Major Scopes of Financial Management – Explained! The other techniques of financial control and evaluation include budgetary control, cost control, internal audit, break-even analysis and ratio analysis. The financial manager has three alternatives regarding dividend decision: * Pay all earnings as dividend * Retain all earnings for reinvestment Required fields are marked *. They produce financial reports, direct investment activities, and develop strategies and plans for the long-term financial goals of their organization. Management of Cash 8. Content Guidelines 2. Finance manager compares the risk with the cost involved and prefers securities with moderate risk factor. This is done to achieve minimum cost of capital and maximise shareholders wealth. Financial Manager is the executive who manages the financial matters of a business. The role of a financial manager is to help decision-makers with their financial decisions so that their businesses continue to turn a profit and minimize costs. 19. 3 Modern Financial Management Techniques that Will Change Your Business Financial Intermediaries - Meaning, Role and Its Importance Role of the Finance Function in the Financial Management … In most firms, both areas are the responsibility of the vice president of finance or CFO. Disclaimer 9. Admin Manager: Where finance manager and assistant have specific duties, the admin manager has three-fold responsibilities: Finance aspects, HR and administration and logistics.The Admin has to take overview and control of the hiring, inventories, stocks, and all other non specific activities. Financial management is what financial manager do to achieve organizational goals and objectives. The factors which influence these decisions include the trend of earnings of the company, the trend of the market price of its shares, the requirements of funds for self- financing the future programmes and so on. The financial management department of any firm is handled by a financial manager. Estimating the Amount of Capital Required: This is the foremost function of the financial manager. The nature of job of an accountant and finance manager is different, an accountant’s job is primarily to record the business transactions, prepare financial statements showing results of the organization for a given period and its financial condition at a given point of time. The funds procured by the financial manager are to be prudently invested in various assets so as to maximise the return on investment: While taking investment decisions, management should be guided by three important principles, viz., safety, profitability, and liquidity. The finance managers must know how much cash will be ‘tied up’ in various kinds of non-cash (or non-liquid) assets. Therefore in order to take care of these activities a financial manager performs all the requisite financial activities. The twin aspects, procurement and effective utilization of funds are crucial tasks faced by a finance manager. Prohibited Content 3. It is the financial manager’s responsibility to plan and estimate the business’s financial needs. A plan is a future course of actions. Evaluation of financial performance is also an important function of financial manager. The goal of the financial manager-The overriding goal is to maximize the wealth of the stockholders. It might require negotiation with creditors and financial institutions, issue of prospectus, etc. Three major functions (DECISION AREAS) of a financial manager are Investment decisions,Financing decision & Dividend decision. Six basic executive finance functions are the following: 1. Investment decision involves decisions being taken regarding investment view the full answer Managerial finance functions are functions that require managerial skills in their planning, execution and control. Since it is a senior position it is advisable to have an experienced person on the job. The Finance function has been classified into three: Long-Term Finance – This includes finance of investment 3 years or more. Thus, the most important ones are related to money. Lease Finance: Type, Advantage and Disadvantage of Leasing. Financial Control. At the very basic, they will a comprehensive asset register. A large number of decisions involve substantial or material changes in value of funds procured or employed. Before publishing your articles on this site, please read the following pages: 1. The finance manager, has to manage funds in such a way so as to make their optimum utilization and to ensure their procurement in a way that the   risk, cost and control are properly balanced under a given situation. A firm can raise funds by the way of equity and debt. Copyright 10. The financial manager has three main tasks:-Make investment decisions-Make financing decisions-Manage cash flow from operating activities. Learn how your comment data is processed. The finance manager or controller has a task entirely different from that of an accountant, he is to manage funds. Content Filtrations 6. Below are Financial Management Functions: 1. The financial planning aspect of the job includes setting goals for achieving specific revenues, profit margins and gross profits. It deals with chalking out a future course of action & deciding in advance the most appropriate course of actions for achievement of pre-determined goals. If carefully reviewed what constitutes a business, we will come to the conclusion that there are two things that matter, money and decision Without money, a company won’t survive and without decisions, money can’t survive. Determining Capital Structure 3. It bridges the gap from where we are & where we want to be. Accountant is not concerned with management of funds that is a specialized task and in modern times a complex one. Unlike a bookkeeper or accountant, a financial manager, often known as a chief financial officer, plans long-term financial strategy for a company, delegating bookkeeping work to lower-level staff. Challenges of International Financial Management, Importance of Capital Investment Decisions, Relationship Between Finance and Accounting, The Role and Responsibilities of Finance Managers, Current Trends in Human Resource Management, Two Basic Aspects of Financial Management. Financial Forecasting and Planning: A financial manager has to estimate the financial needs of a … Utilisation of Funds 6. To organize the division or departmental activities. But the accountant’s main function is to collect and present financial data. Sources of long-term finance include owner capital, share capital, long-term loans, debentures, internal funds and so on. Financial management is an essential action for any organization to manage financial resources. Image Guidelines 5. Functions of financial management or manager. 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