Financial Manager
Financial
Managers are the one who looks after the financial health of the business or
firm. They prepare financial reports, statements and also develop strategies
for meeting future financial goals of the organization. Financial Manager plays
a vital role in management of finance activities of the business.
Role of Financial Manager
Today
the nature and scope of financial management is continuously evolving and thus
the role of financial manager is also continuously evolving. Earlier the role of
financial manager was limited to few things. The role of Financial Manager
around the world has been changing as per the economic changes that took place
but majorly after globalization, liberalization and privatization. Even the
industrial revolution has also had great impact on the role of the Financial
Manager has taken place the role of the financial managers has evolved and kept
on changing. Today the roles of financial manager are
§ Estimation of Capital for Business
` A
financial manager has to properly estimate the capital required for the
organization for its smooth functioning and subsequently arrange the capital.
If by any chance estimation is under/over it will have its own consequences
such as increase in cost of capital, decrease in profits, management problems
may come into picture, conflicts will raise between investors, shareholders and
management for raising excess of capital and much more. Thus a financial
manager has to properly estimate the capital required by business.
§ Determination of Capital Structure
A financial manager has to determine the capital
structure of the firm or organization to keep checks the cost of capital at
optimal level. By properly determining the capital structure financial manager
can also maximize the returns to the shareholders and investors and also will
be able to reduce costs and maintain the financial stability of the firm or
organization. Thus it is the responsibility of the financial manager to have a
well balanced and optimal capital structure of a firm.
§ Sources of Raising funds
A financial manager has to keep on exploring
various sources for raising the funds so that the cost of capital is reduced
and profits are maximized at the same the time financial requirements of the
firm are meet timely at optimal level. Raising funds may be required for
expansion, investments, purchasing of plant and machinery, adoption of new
technologies and more. Thus in order to meet the financial
requirements of the firm a financial manager has to raise funds from various
sources at optimal costs.
§ Utilization of funds
A financial manager’s work is not done after
raising the required funds but he has to utilize and allocate them properly. In
order to utilize them properly a financial manager has to be aware of the
financial needs and requirements of various departments so that he can allocate
them and the funds are utilized in best possible manner so that the financial
goals of the business are met. Thus a financial manager has to optimal utilize
the funds raised by him for meeting financial goals of firm.
§ Control of Financial Activities
Being a financial manager he has to have the
control of all the financial activities of the firm or organization. In order
to control financial activities he has to take various steps so that he
maintain the financial stability, financial position of the firm. Thus in order
to measure the financial performance of the firm a firm he may evaluate ROI,
budgetary controls, cost control and various other analysis. So that he can
have a check and control of financial activities of the firm. Thus a
financial manager has have control over all the financial activities in order
to have achieve financial goals.
§ Understanding of Capital Market
A financial manager should have excellent
understanding of the Capital Market. Capital Market knowledge is required by
the financial manager to know how shares and debentures are performing in
capital market and how the decisions taken by management, shareholders and
himself is having a effect on Capital Market and how is the company performing
in Capital Market. Thus a Financial Manager needs to have a sound understanding
of Capital Market.
§ Management of Cash
A Financial Manager needs to know to management
cash properly. If Financial Manager fails to manage the cash properly then
problems with respect working capital with arise and will lead to other serious
problem which ultimately results in loss of financial stability and profits
will come down. Thus in order to have a sound financial stability and make
sufficient profits for a firm.
§ Distribution of Profits and Surplus
Financial Manager responsible is just to make
profits but he has to distribute them to investors, shareholders and management
in such a manner that all of them are satisfied and conflicts does not arises.
Thus a financial manager has to create sufficient profits and then also
distribute them to shareholders, investors and other people.
Role of Financial Manager in India
The
Role of Financial Manager has India has been changed after the introduction of
LPG Policy, 1991. Till then the role of Financial Manager was limited to few
things but after that financial manager role was widen and after that financial
manager responsibilities increased and kept on evolving and is still evolving.
Today the roles of the Financial Manager in India are as follows
§ Investment Planning and Decisions
§ Financial Structure
§ Corporate Restructuring
§ Working capital Management
§ Performance Management
§ Risk Management
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