|Financial Management | | | |Functions of Finance Executive, Finance Treasurer & Finance Controller | | | |3/16/2012 | | | |Hemnath K.N |
FINANCE EXECUTIVES FUNCTIONS
Executive finance functions include all those financial decisions of importance which require specialized administrative skill. Some of the executive functions are given below:-
The first and foremost function of financial management is to forecast the financial needs of the concern. In the initial stage, it is done by promoters but in a going concern, it is generally performed by the executive chief or by the officers of the finance-department in a large scale enterprise. In estimating the financial requirements of the concern, help of various budgets i.e., sales budget, production budget etc., profit and loss account and Balance Sheet is sought.
ESTABLISHING ASSET-MANAGEMENT POLICIES
In order to estimate and arrange for cash requirements of an enterprise, it is very necessary to decide how much cash will be invested in non-cash assets, i.e., fixed assets, and also the kind and coverage of insurance that a company will carry. Establishing a sound asset management policy is a pre-requisite to successful financial Management. No doubt the financial manager in deciding about the asset-management policies seeks cooperation of marketing executive in making decisions involving the carrying of inventories of finished goods and credit policy etc. and that of the production manager in making decision concerned with the carrying of inventories of raw materials and factory supplies, purchases etc.
ALLOCATION OF NET PROFIT
How to allocate the net profits of the concern is the problem before the financial manager. After paying all taxes, the available net profits of the concern can be allocated for three purposes:-
A. For paying dividends to the shareholders of the comp nay as a return upon this investment.
B. For distributing bonus to the employees and company's contribution tooth profit sharing plans, and
C. Retention of profits for the expansion of business. As far as, the second alternative is concerned, the amount to be paid to employees is generally fixed by statutes or on contractual basis and therefore, there is no problem in allocating profits for that purpose. But a considerably attention is to be paid in so far as first and third alternatives are concerned namely the dividends to be distributed to the shareholders and the amount to be retained for future expansion plans.
CASH FLOWS AND REQUIREMENTS
It is the prime responsibility of the financial manager to see that an adequate supply of cash is available at proper time for the smooth running of the business. A good financial executive should ensure that cash inflow and outflow must be continuous and uninterrupted. Inflow of cash originates in sales and cash outflows or cash requirements are closely related to volume of sales. Here the financial manger is to decided how much cash e must retain to meet the current obligations so that there would be no idle cash balance earning nothing for the company. But there is a dilemma because inflow of cash is not precisely predictable and seldom offset one another. Therefore, the financial manager must maintain a balance between inflow of cash and outflow of cash.
DECIDING UPON BORROWING POLICY...
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