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1. For which decision areas is the financial manager responsible?
2. What are the functions of the controller and the treasurer?
3. What is the relationship between accounting and financial management?

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Comprehension Check Questions:

1. For which decision areas is the financial manager responsible?

Financial Managers take different roles in companies depending on the size of the company and nature of business or industry. Modern approach of financial management provides a conceptual and analytical framework for financial decision making. According to this approach there are 4 major decision areas that confront the Finance Manager these are:-

a) Investment Decisions

This may take the form of Capital Budgeting. Stockholders have entrusted the company with their money and so they expect their money to be invested wisely. Fixed assets investments should always be consistent with the goal of maximizing the market value of the firm. Financial Managers are responsible in making financial decisions in order to grow, including selecting product lines, disposing of business segments, choosing to lease or buy equipment, and selecting investments.

b) Financing Decisions

An example of this is a financial manager who plays an increasingly important role in mergers and consolidations, and in global expansion and related financing. These financial managers should have extensive, specialized knowledge to reduce risks and maximize profit. They are usually hired on a temporary basis to advise senior managers on these and other matters. In fact, some ...

Solution Summary

The solution discusses the decision areas in which the financial manager is responsible, the functions of the controller and the treasurer, and the relationship between accounting and financial management.

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Work Sheet # Questions

1) 1 thru 4 Simple NPV and IRR calculations

2) 5 thru 8 Apply NPV to Pro Forma Statements
Using Pro forma, calculate debt service capabilities

3) 9 thru 13 Entity valuation using different return on capital requirements
Hurdle Rate (Venture capital valuation)

4) 14 thru 16 Project ranking

5) 17 thru 20 Simple Acquisition model

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