New Role of Financial Manger

8/8/2019 New Role of Financial Manger

1/19

BESs Institute of Management Studies and

Research

Presents

Role of Finance Manager

Group Members

Nilesh Jagtap(14) Sunil Kamble(18) Vikas Kharat(26)

Sagar Lawte (28) Pritesh Save(44) Sudhir Singh(50)

Premdeep Singh(51)


2/19

What is Financial Management?

Concerns the acquisition, financing,

and management of assets with someoverall goaloverall goal in mind.


3/19

Focus of Finance Manager in different areasFocus of Finance Manager in different areas

Finance is a set of tools that helps FM (Finance Manager) to

answer the following questions

Firms:

What projects do FM invest in?

How to raise money?

How much money should be return to investors? Whats the best way to return that money?


4/19

ContdContd

Investment Function:

How much is a corporation worth?

How should a company raise money?

How should corporations structure and pay foracquisitions?

Commercial Function:

From whom should the Company borrow?

At what interest rate should be borrowed from market? How does it manage the risk of its loan portfolio?

Trading functions:

What stocks to buy?

When/how best to trade?


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The Role of the Financial ManagerThe Role of the Financial Manager

Caretaker of the shareholders money

Determines which projects the firm should invest in

Decides how to pay for these projects (debt vs. equity) and

what firms mix of debt and equity should be

Debt is tax advantaged but introduces possibility of

bankruptcy and may distort investment decisions

Also ensures that is there the firm has enough cash to meet its

obligations and invest in profitable projects


6/19

ContCont

Principal Decisions in Financial Management

1. Capital Budgeting Decisions (real assets)

Which projects should company invest in?

Should company expand, shutdown or diversify?

2. Financing Decisions (financial assets)

How should company raise cash?

What types of financial claims should company issue?

Common stock? Preferred stock? Convertiblebonds?

How much cash should company return to investors?


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Areas of Financial Managers DecisionAreas of Financial Managers Decision

CapitalCapital

BudgetingBudgetingManagement ofManagement of

Mergers, reorganisationMergers, reorganisation

FinancingFinancingFinancialFinancial

AnalysisAnalysis

Management ofManagement of

Current AssetsCurrent Assets

Method ofMethod of

Raising fundsRaising funds

ImplementationImplementation

DetermineDetermineFinancing mixFinancing mix

FinancialFinancial

ControlControl

ReceivablesReceivables

SelectionSelection

IdentificationIdentificationMarketableMarketable

SecuritiesSecurities

CashCash

FinancialFinancialForecastingForecasting

InventoryInventory

ManagementManagement

SourceSource

identificationidentification

ProfitProfit

planningplanning DividendDividend

policypolicy


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TreasurerCapital BudgetingCash Management

Credit Management

FinAnalysis/PlanningInsurance/Risk MngmtTaxAnalysis/Planning

Finance Manager

ControllerCost ManagementGeneral Ledger

Preparing Budgets

Preparing Fin StmtsPreparing Forecasts

Government Reporting

Organization of the FinancialOrganization of the Financial

Management FunctionManagement Function


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Responsibilities of Finance ManagerResponsibilities of Finance Manager

y Responsible for entire finance department

y Finance manager has to deal with 4As

Anticipation of funds

Acquisition of funds

Allocation of funds

Assessment of funds

y Focus on cost minimization & profitmaximization

y Wealth maximization of the shareholders of thecompany


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Financing Decisions

y What is the best type of financing?

y What is the best financing mix?

y

What is the best dividend policy (e.g., dividend-payout ratio)?

y How will the funds be physically acquired?

Determine how the assets (LHS of balanceDetermine how the assets (LHS of balancesheet) will be financed (RHS of balancesheet) will be financed (RHS of balance

sheet).sheet).


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Asset Management DecisionsAsset Management Decisions

y How do we manage existing assets efficiently?

y Financial Manager has varying degrees of operating

responsibility over assets.

y Greater emphasis on current asset management than

fixed asset management.


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Investment DecisionsInvestment Decisions

y What is the optimal firm size?

y What specific assets should be acquired?

y

What assets (if any) should be reduced oreliminated?

y How do we manage existing assets efficiently?

y Financial Manager has varying degrees of

operating responsibility over assets.y Greater emphasis on current asset management

than fixed asset management.


13/19


14/19

Goal of Financial DecisionGoal of Financial Decision--MakingMaking

Maximize shareholder wealth

Therefore, maximizing shareholders wealth isequivalent to maximizing todays stock price

An increase in shareholder wealth means that firms

assets have created value for its shareholders (and

possibly that the wealth of society has increased)

Equivalent (or nearly equivalent) objectives

Maximize the market value of assets

Maximize the market value of financial claims

Maximize the present value of free cash flows

Shareholder Wealth = Current stock price v umber

o Shares utstanding


15/19

Social ResponsibilitySocial Responsibility

y Wealth maximization does notpreclude the firm

from being socially responsiblesocially responsible.

y Assume we view the firm as producing bothprivateand social goods.

y Then shareholdershareholder wealthwealth maximizationmaximization remains the

appropriate goal in governing the firm.


16/19

Risk to Handle in Foreign operationRisk to Handle in Foreign operation

y Default Risk

y Political Risk

y Economic Risk

y Piracy, sea pirates, accidents insurance

y Financial Risk

y Business Risk

y Foreign Exchange Risk


17/19

International Finance ManagerInternational Finance Manager

y Forecasting

y Application of Derivative in Risk minimization

y Understanding international market trend

y Understanding the competition

y Managing the subsidy


18/19

Role of International FinanceRole of International Finance

ManagerManager

y Fund Raising

y Investment Decision

y Dividend Decisiony Minimizing risk


19/19

Thank YouThank You

e-mail: [email protected]

Documents

New Role of Financial Manger