Question

Discuss the role of the financial manager within a company. Provide at least three examples of specific areas of responsibility that financial managers have along with a discussion of some specific “tools” financial managers use to accomplish their goals.

Answer 1

The role of the finance manager is to Manage finance of company .They are charged with the responsibility related to financial aspects of the company and they are required to keep track of the financial performance of the company.

Three specific roles of financial Managers are-

1. Management of cash flows- A financial manager is entrusted with the responsibility of management of different types of cash inflows and outflows with regards to Different projects undertaken by firm.

2. Determination of optimum capital structure- A financial manager has responsibility of finding out the best possible capital structure which suits to needs of the company and maximizes the overall value of the company and it must be highly focused towards achievement of objectives of firm in effective and efficient manner. Optimum capital structure is an adequate mix of Debt financing and equity financing.

3. Determination of sources of fund and procurement of funds through different selected sources and utilisation of funds in best possible manner which maximize the overall Return on Asset that exceed the cost of funds.

Specific tools a Financial manager uses in order of selection of Different projects are-

1. Net Present Value- It is the value of net cash flows from the project and it is discounted at the present value.

2. Financial Ratios- There are used by a financial manager in order to know the capability of investment from different perspective.

3. Discounted payback period- These are tools used by a financial manager in order to know how much time a project will take to return the cash initial outlays .