Text A. Responsibilities of the Financial Manager

Lesson 1. FINANCE AND THE ROLE OF THE FINANCIAL MANAGER

FINANCIAL MANAGEMENT

Read the text once again, summarize it in 50 words.

Answer the following questions.

1. What does financial control mean?

2. What can be done after establishing financial control?

3. What does financial control provide?

4. Why do taxes also fall under the scrutiny of finance?

5. What is tax management?

6. Why tax management is a financial concern to the firm?

7. Who performs the job of an internal auditor in the company?

8. What does the internal auditor do?

9. Why is it important that the function of internal auditing remains independent?

10. What do the regular internal audits offer the firm?

The way a company handles its finances can make the difference between life and death for the firm. Firms that expand too rapidly and do not plan their cash flows carefully can find their businesses tottering on the brink of bankruptcy. And how well investors understand a company's finances can seriously affect their personal profits or losses.

The business activity concerned with determining a firm's long-term investments, obtaining the funds to pay for those investments, and conducting the firm's everyday financial activities is known as finance (also called «corporate finance»). Production managers are responsible for planning and controlling a firm's output of goods and services. Marketing managers plan and control the development and marketing of products. Similarly, financial managers plan and control the acquisition and dispersal of a company's financial assets.

Financial managers have many responsibilities. These include collecting funds, paying debt, establishing trade credit, obtaining loans, controlling cash balances, and planning for the firm's future financial requirements. But a financial manager's overall objective is to increase the value of the firm and thus to increase stockholders' wealth. To rich this goal, financial managers must ensure that the company's earnings exceed its costs - in other words, that the company earns a profit. In proprietorships and partnerships, profits translate into an increase in the owners wealth. In corporations, profits translate into an increase in the value of common stock.

Managing Cash Flow (Cash Flow Planning)* To increase the firm's value, financial mangers must make sure the company always has enough funds on hand to purchase the materials it needs to produce goods and services. At the same time, any funds not needed immediately must be invested to earn more money for the firm, This management of a firm's cash flow requires careful planning. Otherwise, excess cash balances will sit idle (and therefore be unproductive) or cash deficits will occur.

How extensive is the idle cash situation in businesses? More and more companies are learning that these idle funds can become a profitable workhorse. By finding out where its idle cash is located and putting it to work, companies avoid borrowing from outside sources. The savings on interest payments can be substantial

Pools of idle cash can often be found in checks that are received by a company but not cash immediately. To remedy this situation, companies that receive large numbers of checks can have them sent to lockboxes - addresses near the senders where checks are held in locked boxes for safekeeping. Another source of idle cash can be found in the checks issued by a company but not yet cashed. Some firms used special «controlled disbursement accounts to keep track of these funds. In these accounts, managers use desktop computers wired directly into their banks to see which checks will be cleared by which banks at what times during the day.

Accurate information about current cash status isn't enough for good cash management, however. Managers also need to plan cash flows days, weeks, and months ahead of time. Accurate projections allow firms to take advantage of high-yielding investment opportunities. Many businesses choose to use special financial advisers for this purpose.

Дата добавления: 2015-01-03