Question

1. The field of finance deals with two basic decisions. They are the investment decision (to what projects or assets should funds be allocated) and the financing decisions (from where should the funds be obtained). How would you organize your areas of responsibility if you were the CFO of Procter and Gamble (departments and responsibilities, key positions, accountabilities, etc.) to deal with these responsibilities plus other activities including accounting, reporting, risk management, strategic initiatives, shareholder relations, etc.? An organization chart should be included to supplement the written analysis.

2. If you were the CFO of Procter and Gamble, what guidelines would you establish for approval of proposed capital budgeting projects (i.e., what specific criteria would projects have to meet and why)?

Answer 1

Investment decisions and financing decisions are basic decisions in the field of finance. For smooth functioning of any organisation finance is required. CFO (Cheif financial officer) of any company has to deal with two basic areas as well certain other responsiblities like accounting, reporting, linking financing decisions with mission and value of the comapny etc. So, CFO is key personnal in any organization.

As CFO of Procter and Gamble, my respnsibility first and foremost relates to financial decisions which include where Procter and Gamble finances should be invested to generate good returns which meet the expections of the shareholders particulary and from what sources finance should be raised. However, as CFO, I am also associated with other strategic decisions which are taking into consideration that accounting practices of the company conform to the accounting standards, reporting caters to the needs of various stake holders, Decisions pertaining to investment and borrowings are taken is such a way that risk and retrun trade off can be acheived to best possible extent, strategies particulary diversification, expansion are envisaged so as to fulfil the mission and vision of the company. As such, considering the strategic role which I play in the company, I will have to add staff which can assist me fulfilling my responsibilities. So, along the line of organisational structure, staff function will be added to my office. The staff will assist me in routine matters of preparing communication reports, outlining available alternatives so that company's returns grow without prejudice to any stakeholder's interests. However final decisions are to be take in consultation with top management of the company. Considering all this, organisation chart related to my responsiblities will be

As CFO, I will establish following criteria for approval of proposed capital budgeting projects:

(1) Whether the proposed project would lead to higher returns then minimum required rate of return

(2) Whether the technical and financial resources required to operate the project will be available in time and without interruptions

(3) Whether the proposed project will be able to meet government's environmental and other related guidelines.