Question

Details of the assessment questions:

Essay 1000 words

"An organization’s financial manager plays a critical role in the financial success of a business as the financial activities of a firm is one of the most important and complex activities of a firm"

Please discuss the above statement explaining the main functions of the Financial Manager in the organization

Answer 1

Finances are the cornerstone of every business. The prime goal of any organization would be to garner huge profits and this is only possible with proper management of the finances. Therefore, effectual finance management is imperative for every organization as it leads to enhanced profits and reduction in the operational cost. A finance manager plays an important role in the management of a business organization as he manages all the activities related to finance. There are many functions that a financial manager is expected to perform. These include:

1. Estimating the amount of capital required for the proper functioning of the business

The most basic function of a finance manager is the estimation of the capital because funds are required for both long term and short term. The firm requires capital so that it can meet its liability with no delay, benefit from early business opportunities, pay for resources, operational cost etc. Sufficient capital is also required so that the firm can face any crisis like recession and bottleneck.

2. Devising a capital structure

For the determination of the capital structure, the financial manager must ensure that the earning rate is higher than the rate of interest on the borrowed amount. A fine capital structure is required to minimize operational cost and to maximize the shareholder’s profits.

3. Sources to raise funds

For proper financial management, it is imperative to find the various sources from where the firm can raise funds. The organization can raise funds through different sources including equity and preference shares, debentures, banks, financial institutions and other sources. The funds can be raised for short as well as long period.

4. Acquisition of funds

While acquiring funds, the financial manager needs to follow some basic steps such as legal formalities and documentation required. He might also need to negotiate with the financial institutions. The factors affecting procurement are the market conditions, the policy of the government, investor’s choice, and many more.

5. Utilizing funds

It is the task of the finance manager to ensure that the funds are invested wisely so as to garner maximum ROI. While investing, the firm must take care of safety, profitability, and liquidity of the funds. The funds must be utilized in such a way that the firm does not face its shortage in near future.

6. Disposing of profits

Effectual finance management involves analyzing the funds that can be invested for proper working of the organization and distributing the rest among the shareholders. The firm’s earning must be in such a way that a large proportion can be distributed among the investors.

7. Managing the available cash

A financial manager needs to manage the cash in such a way that there is neither shortage nor surplus and daily expenses can be met without any hassles. This can be done by forecasting cash inflows and outflows and balancing them. The manager must ensure that sufficient funds are always available to purchase material and meet daily expenses.

8. Control of Finance

Finance management involves evaluation and control of the financial performance of an organization. This involves employing finance control techniques, auditing, break-even analysis and analysis of cost. Finally, ROI is measured which deciphers whether the company has incurred profits or loss.

The aforementioned functions of finance managers ensure that the company’s finances are managed efficaciously.