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Chapter - 3

Financial managers are responsible for making risk-return tradeoff decisions involving planning, acquiring, and utilizing funds which affect the market value of the firm's stock and lead to wealth maximization. They must interact with other managers to understand goals and allocate funds to assets in obtaining the best financing mix and dividend policy. Finance is integral to total management and requires accounting, banking, investment, insurance, and other jobs to track transactions and ensure investor funds are safe while achieving benefits for society ethically under governmental regulations.

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Precious Nicole Santos
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23 views2 pages

Chapter - 3

Financial managers are responsible for making risk-return tradeoff decisions involving planning, acquiring, and utilizing funds which affect the market value of the firm's stock and lead to wealth maximization. They must interact with other managers to understand goals and allocate funds to assets in obtaining the best financing mix and dividend policy. Finance is integral to total management and requires accounting, banking, investment, insurance, and other jobs to track transactions and ensure investor funds are safe while achieving benefits for society ethically under governmental regulations.

Uploaded by

Precious Nicole Santos
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
Download as pdf or txt
Download as pdf or txt
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CHAPTER 3 – FUNCTIONS OF FINANCIAL MANAGEMENT

I. Financial Manager’s Role


- Financial managers are responsible for making decisions that involves planning, acquiring, and
utilizing funds which involve a set of risk-return trade-offs. These financial decisions affect the market
value of the firm’s stock which lead to wealth maximization.
- Financial management is also responsible to allocate funds to current and fixed assets in order to
obtain the best mix of financing alternatives and divided policy.

Financial Manger makes Decisions involving

Analyzing and Acquisition of Utilization of


Planning Funds Funds

Impact on risk and


Return

Affect the Market


Price of Common
Stock

Lead the
Shareholder’s Wealth
Maximization

II. Finance Organization


Board of Directors

Chairman of the Board


and Chief Executive
Officer (CEO)

President and Chief


Operations Officer
(COO)

Vice President Vice President Vice President


Marketing Finance (CFO) Production

Treasurer Controller

Cash Credit Tax Cost


Manager Manager Accounting
Manager
Manager

Capital Financial Financial Data


Expenditure Planning Accounting Processing
Manager Manager

III. Relationship with Other Key Functional Managers in the Organization


- Finance is one of the major functional areas of a business. Hence, most of the functional areas could
not operate without funds. Therefore, financial manager must interact with other manager to ascertain
the goals that must be met. Thus, finance is an integral part of total management and cuts across
functional boundaries.
IV. Corporate Governance
- This is the process of monitoring managers and aligning their incentives with shareholders goals. Since
public investors does not know how the firm operates, managers handle the day-to-day operations.
This lack of supervision demonstrates the need for monitors.
V. Jobs in Finance
Accounting –
• Accounting – needs to know finance for it affects decisions in all areas in
marketing, management, and human resources.
• Banking
Marketing– – proposed advertising programs are examined by finance people.
• Investment –
Banking – tracking financial transactions and monitoring funds and accounts.
Investment–– examining economic and market trends and other indicators or
• Insurance
CorporationsGoverment –
factors to determine investment strategies. Ensuring the safety of investor’s funds.
• Insurance – achieving potential significant benefits.
• Corporations
• Government

VI. Ethical Behavior


- Ethics are primary important in any practice of finance.
- Governments all over the world have passed laws and regulations meant to ensure compliance with
ethical codes of behaviors.
- Financial managers must choose the best decisions to protect and further shareholders’ interest but
also have a broader obligation to society as a whole.

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