{"id":275,"date":"2018-09-24T15:20:19","date_gmt":"2018-09-24T15:20:19","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/suny-osintrobus\/chapter\/the-role-of-finance-and-the-financial-manager\/"},"modified":"2018-10-12T19:10:10","modified_gmt":"2018-10-12T19:10:10","slug":"the-role-of-finance-and-the-financial-manager","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-herkimer-osintrobus\/chapter\/the-role-of-finance-and-the-financial-manager\/","title":{"raw":"The Role of Finance and the Financial Manager","rendered":"The Role of Finance and the Financial Manager"},"content":{"raw":"
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  1. How do finance and the financial manager affect the firm\u2019s overall strategy?<\/li>\r\n<\/ol>\r\n

    Any company, whether it\u2019s a small-town bakery or General Motors, needs money to operate. To make money, it must first spend money\u2014on inventory and supplies, equipment and facilities, and employee wages and salaries. Therefore, finance is critical to the success of all companies. It may not be as visible as marketing or production, but management of a firm\u2019s finances is just as much a key to the firm\u2019s success.<\/p>\r\n

    Financial management<\/strong>\u2014the art and science of managing a firm\u2019s money so that it can meet its goals\u2014is not just the responsibility of the finance department. All business decisions have financial consequences. Managers in all departments must work closely with financial personnel. If you are a sales representative, for example, the company\u2019s credit and collection policies will affect your ability to make sales. The head of the IT department will need to justify any requests for new computer systems or employee laptops.<\/p>\r\n

    Revenues from sales of the firm\u2019s products should be the chief source of funding. But money from sales doesn\u2019t always come in when it\u2019s needed to pay the bills. Financial managers must track how money is flowing into and out of the firm (see (Figure)<\/a><\/strong>). They work with the firm\u2019s other department managers to determine how available funds will be used and how much money is needed. Then they choose the best sources to obtain the required funding.<\/p>\r\nFor example, a financial manager will track day-to-day operational data such as cash collections and disbursements to ensure that the company has enough cash to meet its obligations. Over a longer time horizon, the manager will thoroughly study whether and when the company should open a new manufacturing facility. The manager will also suggest the most appropriate way to finance the project, raise the funds, and then monitor the project\u2019s implementation and operation.\r\n

    Financial management is closely related to accounting. In most firms, both areas are the responsibility of the vice president of finance or CFO. But the accountant\u2019s main function is to collect and present financial data. Financial managers use financial statements and other information prepared by accountants to make financial decisions. Financial managers focus on cash flows<\/strong>, the inflows and outflows of cash. They plan and monitor the firm\u2019s cash flows to ensure that cash is available when needed.<\/p>\r\n\r\n

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    The Financial Manager\u2019s Responsibilities and Activities<\/h3>\r\n

    Financial managers have a complex and challenging job. They analyze financial data prepared by accountants, monitor the firm\u2019s financial status, and prepare and implement financial plans. One day they may be developing a better way to automate cash collections, and the next they may be analyzing a proposed acquisition. The key activities of the financial manager are:<\/p>\r\n\r\n