The financial manager is very important within the structure of any firm. Almost every firm of any size has a person whose role it is to “create value from the firm’s capital structure, financial and net capital operations” (Ross, 2005). This person is the financial manager, although that job can go by one of several names. Financial managers oversee the preparation of financial reports, execute cash management strategies, and coordinate corporate investment operations. In addition, this service also includes specific and long-term corporate goals such as those in the short term.
The role of finance in maximizing shareholder value
In many ways, the financial manager must become a strategic partner of the chief executive. The financial manager is responsible for the nerves, but also for the future of the university. The financial manager must also demonstrate effective use of financial resources, using effective financial management practices; in this way, the financial manager, above all others, is the most important contributor to the value of the shares. The financial manager must also ensure that resources are protected from fraud, and, especially under the new auspices of the Sarbanes-Oxley Act, protect. resources from fraud and abuse (Gitman, 1987).
A financial manager must evaluate what type of growth is most appropriate for the organization
Stakeholders, opinion maximization of wealth
The firm buys equity in the form of debt and credit from investors (Booth, 1998), and in returns, the investor expects better returns. about capital dividends in the form of investment. From the perspective of the stockholder, the key to success of the corporation is represented in the ability of the corporation not only to meet its debt and other obligations, but also in the ability of the corporation to meet the needs of the shareholder in terms of dividends, maximization of wealth and common value (Booth, 1998). The partners bear the greater part of the burden in the liability, as they are the last guarantors to be compensated. Those who have borne the greatest risk therefore want to be rewarded with the greatest share of corporate pie. If investors do not receive what they feel they are owed, they will either vote the current management out of office (by electing a new board of directors) or they will take their investment elsewhere, to a corporation that will provide a return. seeking This, in turn, will likely discourage other investors from entering with their capital.
However, the employee is not necessarily as active in the majority of the retained earnings flowing to the investors, unless the employees have a significant stake in the common stock prices through incentive programs or understand the presence of investors. /cash-flow-statement”>cash flow completely. Employees often like to see retained earnings flow back into the company, and into their hands, in the form of better, newer equipment, training programs and employee incentive programs. The financial manager must be able to adapt to these competing needs in order to keep those in the company satisfied and to maintain adequate returns to the investors. This is especially important in times when it’s a “hiring market” and good employees are harder to come by.
In general, it can be argued that the safety of firms with the greatest resources is not harmed, nor is the safety of other stakeholders in the business (Booth, 1998). However, the manager must have a very keen eye for instances when wealth maximization comes at the expense of the community health of the university and the health and welfare of employees.
What is the value of partners?
It is easy, at this point, to assume that shareholder value justifies many of the corporate crimes we see in today’s business world. However, things like environmental damage, sweatshops, and union busting can all have a big impact on the bottom line, which in turn cuts into shareholder value. A bad public investor can turn to a company as surely as a poor return can. A wise financial manager will be one who not only keeps an eye on capital costs projects and expenses. but it is also responsive to the political and social climate within which the body operates. For example, consumers are willing to pay more for shade-grown coffee championed by the Starbucks Corporation, so much so that it is now the industry standard. This desire helped fuel a huge boom in the coffee machine industry, which propelled Starbucks into its position as the world’s number one coffee retailer. Starbucks also defended the cause of the coffee plantation worker by only doing business with plantations that provide living wages and plantations that meet their standards for good environmental stewardship. As late as 2002, Starbucks found itself responding to pain requests by partner demands for labels on genetically engineered foods. All of this is reflected in Starbuck’s bottom line, which, despite being very expensive at the beginning, has proven to be a danger to all people. Therefore, shareholder value is not necessarily measured in simple capital, but also in intangible measures such as goodwill and brand recognition.
Summary and conclusion
The role of the financial manager is more than simply someone who, like the accountant years ago, matched the assets and liabilities of the university. A financial manager is part financial wizard, part strategic advisor, as well as someone with a keen eye for industry trends and standards. The financial manager must know all aspects of the business in order to adequately advise and support the chief executive in making decisions and ensuring the company’s growth and profitability in the future.
References
Booth, L. (1998). Which drives away the value of the shareholders. Paper presented at the Federal Press “Creating Shareholder Value” conference. Retrieved from http://www.mgmt.utoronto.ca/~booth/value.pdf February 18, 2006.
Gitman, L.J. (1992) Foundations of Managerial Finance, 3rd Edition Harper Collins, New York, New York.
Ross, S.A., Westerfield, R.W., Jaffe, J. (2005). McGraw-Hill/Irwin. Antwerp, Venice. Online ed.
http://www.bls.gov/oco/ocos010.htm Retrieved February 19, 2006.
http://www.organicconsumers.org/starbucks/proxy022602.cfm Retrieved February 19, 2006.
http://www.conservation.org/xp/news/press_releases/2000/081100.xml Retrieved February 19, 2006.
