New Role of Financial Manger
Transcript of New Role of Financial Manger
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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)
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What is Financial Management?
Concerns the acquisition, financing,
and management of assets with someoverall goaloverall goal in mind.
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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?
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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
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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.
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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
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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.
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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
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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
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Role of International FinanceRole of International Finance
ManagerManager
y Fund Raising
y Investment Decision
y Dividend Decisiony Minimizing risk
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Thank YouThank You
e-mail: [email protected]