2. ROLE OF FINANCE DEPARTMENT
Financial Management means planning, organizing, directing and
controlling the financial activities such as procurement and utilization
of funds of the enterprise.
SCOPE:
•Investment decisions includes investment in fixed assets (called as
capital budgeting)
•Financial decisions - They relate to the raising of finance from various
resources which will depend upon decision on type of source, period of
financing, cost of financing and the returns thereby.
•Dividend decision - The finance manager has to take decision with
regards to the net profit distribution.
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3. INTERFACE OF FINANCE FUNCTION WITH
OTHER FUNCTIONAL AREAS
Financial Management and Economics
Financial management also uses the economic equations like money value
discount factor, economic order quantity etc.
Financial Management and Accounting
Accounting records includes the financial information of the business concern.
Financial Management and Mathematics
EOQ, discount factor, time value of money, PV of money, ko, capital structure
theories, dividend theories, etc are used as mathematical and statistical tools and
techniques in the field of financial management.
Financial Management and Human Resource
Allocates the finance to the HRD as wages, salary, remuneration, commission, etc
Financial Management and Marketing
Finance department is responsible to allocate the adequate finance to the
marketing department. 3
4. OBJECTIVES OF FINANCIAL
MANAGEMENT
Goal Objective Advantages Disadvantages
Profit
maximizati
on
Large
profits
1. Easy to calculate profits.
2. Easy to determine the link
between financial decisions and
profits.
1. Emphasizes the short-term.
2. Ignores risk or uncertainty.
3. Ignores the timing of returns.
4. Requires immediate
resources.
Wealth
maximizati
on
Highest share
price of
common
stock
1. Emphasizes the long term.
2. Recognizes risk or uncertainty.
3. Recognizes the timing of
returns.
4. Considers stockholders`
return.
1. Offers no clear relationship
between financial decisions and
stock price.
2. Can lead to management
anxiety and frustration.
3. Can promote aggressive
and creative accounting
practices.
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5. Finance Journey: Finance
Transformation
5
CFO of your own OpCo
Dotted Line to CFO
“Beancounters”
9000 Finance people
Focus on Transactions
Transactions at every site
One Global Finance Function
Solid Line to CFO
Partners in Value Creation
5500 Finance people
Focus on Decision Support
Shared Services / Outsourced
6. CFO OF UNILEVER-Jean-
Marc Huët
•CFOs are expected to play four
diverse and challenging roles:
steward, operator, strategist and
catalyst.
•CORE ELEMENTS
•Trusting the numbers
•Providing insight
•Getting your house in order
•Funding organizational strategy
•Developing business strategy
•Communicating to the external
marketplace.
At Unilever he is responsible for Financial Reporting, Finance in the
Regions, Tax, Treasury, Pensions, Mergers & Acquisitions,
Investor Relations and Information Management.
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7. REFERENCE
•http://www.unilever.com/careers/careerchoices/finance/ Accessed @
23/10/2012 17:30
•http://www.journalofaccountancy.com/Issues/2009/Sep/20091501.htm
Accessed @ 23/10/2012 17:45
•http://www.business-standard.com/india/news/the-21st-century-
cfo/387187/ Accessed @ 24/10/2012, 10 am
•http://worldacademyonline.com/article/24/338/profit_maximization_vs__sto
ckholder_wealth_maximization.html Accessed on 24 Oct at 4pm
•http://www.ey.com/GL/en/Issues/Managing-finance/CFO_overview
Accessed on 24 Oct at 4 30pm
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