Saturday, October 25, 2008

The Role of Finance Manager

The role of finance manager in the company is an important one. The function of the finance manager is not confined to the management and making of the accounts but it also plays a major role in dividend decisions, capital budgeting decisions, capital structure outlay of the firm, decision related to the merger and acquisitions, and all the investment decisions of the firm. Thus the finance manager plays an important role in any business enterprise.

The different decisions can be classified into:
  1. The routine working capital and cash management decisions.
  2. Dividend decisions
  3. Investment decisions
  4. Financial forecasting
  5. International financial decisions
  6. Portfolio management
  7. Risk management
  8. Cash management
while the dividend decisions are related to deciding the amount that is to be distributed to the shareholders, the investment decisions relate to the investment that the company makes in different projects so as to expand the business and improve its profitability. The finance manager here appraises the various projects and judges their profitability. The manager also decides how much capital should be employed in the project and which sources are the best for financing the project. Such decision also extends to the investments in the foreign and the local market which requires a thorough knowledge of the market trends thus the role becomes important.

The top management takes the advice of the finance manager for the capital structure outlay of the firm.

On the monthly and yearly basis the manager looks into the inventory requirements, daily cash requirements, and the objectives of the firm and then plans a budget accordingly for different departments so that they receive optimum amount to carry out the activities and achieve the business objectives.

On the basis of the previous year budget utilization, different reviews and study reports prepared by the research department, finance manager prepares a budget and allocate the recourses for the coming year.

With globalization the role of finance manager is not confined to the regional boundaries but has spread to the activities involving taking the decisions regarding mergers and acquisitions, establishing of the subsidiaries and investing in the foreign markets. Here the finance manager looks into the profits that the business can generate from establishing the subsidiary, what should be the capital outlay of the firm, what tax benefits the firm can avail by establishing and expanding into the foreign market?

A finance manager thus not only acts as a person maintaining the accounts but also plays a major role in the management of portfolio, risk, cash and capital.

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