Question

: What aspects of cash flows is part of the financial manager's responsibility?

Elaborate on the financial management function. In particular, the inter-relationships between the CEO, and its reporting lines under CFO; who are the ultimate boss for CFO, and CFO responsibilities to the real boss?

If you are CFO of a big blue-chip company and would like to issue a bond (borrowing), what are the macro economic factors and others you will consider before the issuance of the bond?

Answer 1

Financial managers have a complex and challenging job. They analyze financial data prepared by accountants, monitor the firm’s financial status, and prepare and implement financial plans. One day they may be developing a better way to automate cash collections, and the next they may be analyzing a proposed acquisition. The key activities of the financial manager are:

· Financial planning: Preparing the financial plan, which projects revenues, expenditures, and financing needs over a given period.

· Investment (spending money): Investing the firm’s funds in projects and securities that provide high returns in relation to their risks. They consider all the macro economic data before taking investment s

· Financing (raising money): Obtaining funding for the firm’s operations and investments and seeking the best balance between debt (borrowed funds) and equity (funds raised through the sale of ownership in the business).

The CFO reports to the chief executive officer (CEO) but has significant input in the company's investments, capital structure and how the company manages its income and expenses. The CFO works with other senior managers and plays a key role in a company's overall success, especially in the long run.

For example, when the marketing department wants to launch a new campaign, the CFO may help to ensure the campaign is feasible or give input on the funds available for the campaign.

The CFO may assist the CEO with forecasting, cost-benefit analysis and obtaining funding for various initiatives. In the financial industry, a CFO is the highest-ranking position, and in other industries, it is usually the third-highest position in a company. A CFO can become a CEO, chief operating officer or president of a company.

Before issuing bond to the company OFO must consider macro economic data especially systematic risk and unsystematic risk.

Systamatic risk is nothing but market risk that is inflation risk, interest rate risk, unexpected chnage in tax law, credit crisis and currency risk all those impact bond issuance.

Coming to Unsystematic it is more like firms specific risk, that is bankruptcy, liquidity, reputation and lawsuit, acidents and obsolence etc.