Role of financial manager

financial activities of a firm is one of the most important and complex activities of
a firm. Therefore in order to take care of these activities a financial manager
performs all the requisite financial activities.

A financial manger is a person who takes care of all the important financial
functions of an organization. The person responsible for raising funds are utilized
in the most efficient manner. His actions directly affect the Profitability, growth
and goodwill of the firm.

Following are the main functions of a Financial Manager:

Raising of Funds
• financial manager is responsible for raisng funds and utlilized in
the most effective place in the organization.
• financial manager has to find from where they take funds
• financial manager has to make financial forecasting
• financial manager has to mantain the liquidity position of the firm
Allocation of Funds
Once the funds are raised through different channels the next important function is
to allocate the funds.

• The size of the firm and its growth capability

• Status of assets whether they are long-term or short-term
• Mode by which the funds are raised
Profit Planning
Profit earning is one of the prime functions of any business organization.
Profit earning is important for survival and sustenance of any
organization. Profit planning refers to proper usage of the profit
generated by the firm.

Capital Budgeting
A finance manager determines and evaluates potential expenses or
investments that are large in nature. Such expenditure can be anything
like having a new branch office or investing in a new long-term venture.
Apart from these, there are many other important responsibilities that a
finance manager shoulders. One cannot undermine the role of finance
personnel.

A finance manager plays a vital role as finance is the backbone of any

organization. The organization can grow by leaps and bounds, provided
sound business decisions are taken at the right time. These important
decisions come from the finance manager’s desk.
Role of the Financial Manager

a) Making investment decisions (cost effective use of assets)

b) Making financing decisions

c) Ensuring profitability

d) Ensuring positive cashflows

e) Ensuring Solvency.

Financial goals of the firm

In finance , the goal of the firm is always described as "maximization of
shareholders' wealth" and profit

Profit Maximization

• Most important funtion of firm is to mazimization profit of the firm through

different channal

• Management mainly focus on efficient utilization of capital resources to

maximize profits without considering the consequences of its actions
towards the company’s future performance

Maximization of Shareholders' Wealth

The goal is o maximize the shareholders' wealth for whom it is being operated. It
being measured by the share price of the stock, which in turn is based on the timing
of returns, the amount of the returns and the risk or uncertainty of the returns.

It also means maximizing the total market value of the existing shareholders'
common stock. All financial decisions will affect the achievement of this goal.

Maximization Of Firms Growth Rate

According to Robin Morris, managers try to maximise the firm’s

Balanced Growth Rate

subject to managerial and financial constraints. A firms growth rateis balanced

when the demand for its products and the supply of capital to the firmincrease at
the same rate. The two growth rates are translated two utilityfunctions : (i)
Manager’s Utility Function and (ii) Owner’s Utility Function.Managers try to
achieve both the above objectives so as to maximize firms Balanced Growth Rat