1.

Define:

Finance

o Finance can be defined as the science and art of managing money. Finance
involves how firms raise money from investors, how firms invest their money in
an attempt to earn profits, and how they decide whether to reinvest profits in the
business or distribute them back to investors.

Financial management

o Finance management may be defined as the responsibility for acquiring the

necessary financial resources at the best conditions possible to ensure the most
advantageous financial results for the enterprise over both the short and long
term. The term “financial management” also covers the responsibility for making
sure the enterprise makes the best use of its financial resource.

Role of a finance manager

Finance manager is the principal personnel responsible for the financial

management of the business, including financial records and reports. He is in
charge of all decisions relating to investment, financing, dividend and liquidity or short-
term asset mix of the entity. Long-term sustainability of business depends largely on the
ability of the finance manager to drive the finance process (Nguyen, 2001). He is duty
bound to plan, control and take responsibility on the types and sources of finance the
enterprise may employ, how they may be accessed and how to choose among them.
So basically, the role of a finance manager is:

 Financial planning
Financial planning is more than being concerned with the preparation of financial
budgets. Typically, financial management includes planning, developing and
finalizing an appropriate book-keeping or accounting system and deciding on
effective pricing and credit policies, financial procedures and process to be
followed.
 Financial organizing

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 Another part of financial management is the responsibility to arrange and to
organize needed financial activities, equipment and people in the most effective
way to carry out the financial function. Financial organizing function and process
is a continuous activity and process.
 Financial activating
A financial manager has the responsibility to lead and motivate the other people
in the unit or enterprise and to ensure effective and efficient communications.
Example: letting other functional managers to know the full details of the next
annual financial budgeting project in good time.
 Financial controlling
A financial manager has the responsibility to determine the performance criteria
by drawing up financial forecast and budgets in order to plan as what should be
done, what is expected and desired to happen. He also needs to measure the
actual performance, comparing the expected outcomes with the actual
performance and taking corrective actions in the business.
 Financial management ensures that the company’s project control system is
operating properly and that sureties are familiar with it.
 Establish a strong financial and operational reporting system with sureties.

The role of the financial manager, particularly in business, is changing in response to

technological advances that have significantly reduced the amount of time it takes to
produce financial reports. Financial managers’ main responsibility used to be monitoring
a company’s finances, but they now do more data analysis and advise senior managers
on ideas to maximize profits. They often work on teams, acting as business advisors to
top executives.

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2. Objectives of finance management

 Increasing sales
In order for a finance manager to increase sales, he/she has to make the right
choices by not over-investing in inventory and by stocking a range of products
that is in demand and will turnover rapidly.
 Increasing market share
A finance manager has to make the right choices with regard to choosing the
best investments, the best financing and the best and cheapest way to manage
everyday financial activities.
 Minimizing cost
A finance manager has to practice responsible marketing and cutting some of the
unnecessary cost to enjoy the benefits of economies of scale. That way, the
costs will be minimized.
 Increasing growth in profits
Financial management wants to increase profits but that may only be achieved
by marketing products or services with support of promotion at competitive prices
to appropriate target markets through appropriate distribution channels.
 Avoiding insolvency
Financial management should make sure that the liabilities do not exceed the
asset through controlling the spending patterns of the organisation to avoid
bankruptcy and borrowing money from banks.
 Surviving
The finance manager’s should control, plan and set goal for the organisation so
that it will be able survive, prosper and continue offering the most authentic
good/service in the market for more years to come.
 By investing in assets that will add value to the firm.

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CONCLUSION
In this assignment we have looked at finance from a distance to ensure that we have a
good understanding of the big picture. This assignment also gives us an overview of the
role of a financial manager, the financial decisions that has to be made and the main
goal of financial management. We concluded that the objective of a company, which is
also the objective of the financial manager, is to maximize the wealth of the firm.

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REFERENCES
Emery, D., Finnerty, J. and Stowe, J. (2011). Corporate financial management. 3rd ed.
Morristown, NJ: Wohl Publishing Pearson Prentice Hall, pp.600 - 633.

Brealey, R., Myers, S. and Allen, F. (2008). Principles of corporate finance. 1st ed.
Boston: McGraw-Hill/Irwin, pp.639 - 659.

Berk, J. and DeMarzo, P. (n.d.). Corporate finance. 3rd ed. Pearson, pp.859 - 881.

Ross, S., Westerfield, R., Jaffe, J. and Jordan, B. (2011). Core principles and
applications of corporate finance. 1st ed. New York: McGraw-Hill/Irwin, pp.652 - 671.

Websites

http://www.yourarticlelibrary.com/financial-management/8-functions-of-a-financial-
manager-management/27972

http://blog.mitsde.com/8-must-know-functions-of-finance-manager

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