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What are the three major functions of the financial manager and how are they related?
Wiki User
∙ 10y ago
a).What are the three major functions of the financial manager?How are they related?
Ans:
Introduction
Financial Management is the efficient and effective planning and controlling of financial resources so as to maximize profitability and ensuring liquidity for an individual (called Personal Finance) , government (called public finance) and for profit and non-profit organization/firm (called corporate or managerial finance).Generally, it involves balancing risks and profitability.
The decision function of financial management can be divided into the following three major areas:
1):Investment Decision:
The most important decision.It begins with the firm determining the total amount of assets needed to be held by the firm.There are two types of investment decision:
a):Capital Investment Decision:
Involves large sums of money.The impact is critical.Example acquire a new machine or to set up a new plant.
b):Working Capital Investment Decision:
A more routine or schedule form of decision.Examples are determination of the amount of inventories , cash and account receivables to hold within a certain period.
2):Financing Decision:
The second major decision . After deciding on what assets to buy or what securities to invest in , the financial manager would have to decide on how to finance these assets.
Sources of finance -- 2 sources ; Borrowings and / or Capital.
3):Assets Management Decision:
The third and the last decision. Once the assets have been acquired and appropriate financing provided, these assets must be managed efficiently . By managing currents assets effectively and efficiently, the company can increase its returns and minimizes its risk of illiquidity.
Conclusion:
Financial Management has become very complex over the last few decades. The area of financial has emerged into a unique area separate from either economics or accounting. It has since developed into a very decision oriented field where internal decisions are made in context of the external financial environment with a goal of maximized shareholder's wealth.
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∙ 10y ago
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What are the three major functions of the financial manager How are they related?
a).What are the three major functions of the financial manager?How are they related? Ans: Introduction Financial Management is the efficient and effective planning and controlling of financial resources so as to maximize profitability and ensuring liquidity for an individual (called Personal Finance) , government (called public finance) and for profit and non-profit organization/firm (called corporate or managerial finance).Generally, it involves balancing risks and profitability. The decision function of financial management can be divided into the following three major areas: 1):Investment Decision: The most important decision.It begins with the firm determining the total amount of assets needed to be held by the firm.There are two types of investment decision: a):Capital Investment Decision: Involves large sums of money.The impact is critical.Example acquire a new machine or to set up a new plant. b):Working Capital Investment Decision: A more routine or schedule form of decision.Examples are determination of the amount of inventories , cash and account receivables to hold within a certain period. 2):Financing Decision: The second major decision . After deciding on what assets to buy or what securities to invest in , the financial manager would have to decide on how to finance these assets. Sources of finance -- 2 sources ; Borrowings and / or Capital. 3):Assets Management Decision: The third and the last decision. Once the assets have been acquired and appropriate financing provided, these assets must be managed efficiently . By managing currents assets effectively and efficiently, the company can increase its returns and minimizes its risk of illiquidity. Conclusion: Financial Management has become very complex over the last few decades. The area of financial has emerged into a unique area separate from either Economics or accounting. It has since developed into a very decision oriented field where internal decisions are made in context of the external financial environment with a goal of maximized shareholder's wealth.
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