What are the same specific activities with which a firms finance staff is involved?

Answer 1

The financial staff's task is to acquire and then help operate resources so as to

maximize the value of the firm. Here are some specific activities:

1. Forecasting and planning. The financial staff must coordinate the planning

process. This means they must interact with people from other departments

as they look ahead and lay the plans that will shape the firm's

future.

2. Major investment and financing decisions. A successful firm usually

has rapid growth in sales, which requires investments in plant, equipment,

and inventory. The financial staff must help determine the optimal

sales growth rate, help decide what specific assets to acquire, and then

choose the best way to finance those assets. For example, should the firm

finance with debt, equity, or some combination of the two, and if debt is

used, how much should be long term and how much short term?

3. Coordination and control. The financial staff must interact with other

personnel to ensure that the firm is operated as efficiently as possible. All

business decisions have financial implications, and all managers-financial

and otherwise-need to take this into account. For example, marketing

decisions affect sales growth, which in turn influences investment

requirements. Thus, marketing decision makers must take account of

how their actions affect and are affected by such factors as the availability

of funds, inventory policies, and plant capacity utilization.

4. Dealing with the financial markets. The financial staff must deal with

the money and capital markets. As we shall see in Chapter 5, each firm affects

and is affected by the general financial markets where funds are raised, where the firm's securities are traded, and where investors either

make or lose money.

5. Risk management. All businesses face risks, including natural disasters

such as fires and floods, uncertainties in commodity and security markets,

volatile interest rates, and fluctuating foreign exchange rates.

However, many of these risks can be reduced by purchasing insurance

or by hedging in the derivatives markets. The financial staff is responsible

for the firm's overall risk management program, including identifying

the risks that should be managed and then managing them in the

most efficient manner.

In summary, people working in financial management make decisions regarding

which assets their firms should acquire, how those assets should be financed,

and how the firm should conduct its operations. If these responsibilities are performed

optimally, financial managers will help to maximize the values of their

firms, and this will also contribute to the welfare of consumers and employees.