My Study in Denmark

Wahid’s observation - The goal of the financial manager in an organization’s / financial institutions



Summary: “Wahid observation” Clarified the major goal of an organization’s financial manager should be make the most of the value per share of obtainable stock, though "make the most of shareholder wealth" or “make the most of stock price" are other general traditions to state this same goal. As my observation this goal also motivates the capital-budgeting decision rules.



Author Proclamation: “Wahid observation” I have presented the financial manager goal in an organization in fresh classified. My observations will apply to large and small businesses will have more implication for one variety of business than another in financial manager the importance is laid on best operation of funds. Financial manager is vital to all levels of human survival as every entity has to look after its finances. Financial management is also referred as planning, organizing and calculating the financial wealth of an organization.


Introduction: The financial manager’s goal is to make the most of shareholder wealth. The shareholders own the company and their wealth is at risk. The financial manager is the caretaker of the shareholders’ money and his/her job is to make decisions in the best interest of the owners. As we'll see, this goal also motivates the capital-budgeting decision rules. Firms will only accept projects if they add worth to the firm .The way to do this is to make decisions that make the most of the value of the firm.


Who is the financial manager?


1. Anyone dependable for a significant financial decision of a company.

2. The main financial managers are usually the treasurer and, for larger companies the controller in the largest companies, they may report to the chief financial officer.



There are different aspects to the financial manager’s job:


1. Understanding capital markets.

2. Understanding value.

3. Understanding the effects of time and uncertainty.


The Objective of the Financial Manager


1. Although many claim-holders have a stake in the firm’s income, the shareholders are the firm’s owners, and managers should act in their best interests.

2. There are potential conflicts of interest between management and shareholders, and among the various claim-holder groups.

3. Also, since stockholders are the residual claimants, maximizing their stake will generally be consistent with maximizing everyone’s stake.






Goal of the financial manager


The ultimate goal of any financial manager (as well as the firm) is make the most of shareholders’ wealth.  A good financial manager therefore should carefully consider and weigh the risk of undertaking a certain project against the profits associated with undertaking such a project.  Capital Budgeting techniques enable the manager to make such decisions.


The financial manager’s major goal of an organization’s I have classified the three (03) categories that is below


(1) Make the most of profits

(2) Reduce costs

(3) Make best use of market



(1) Make the most of profits:


possibly the first thing that comes to mind, the goal of any administration to finance in any organization is to make the most of profit, but the expression of the objective of financial manager is to make the most of profit term is inaccurate. For case, Do you mean this: to make the most of profits of that a year? If so, this may lead to some activities, others favor the long-term in order to make the most of profit this year, such as reduced maintenance expenses, reduce inventory and other things that lead to the reduction of expenses This year alone, leading to increased profits with the presence of future damage


Possibly expressed by some that the goal of financial manager is to make the most of  long-term profits, this is also an inaccurate, it make the most of  profits of the company accounts and on paper in the long run, but we are surprised that the profit owners have decreased


Second, since net income is calculated for each of a possibly infinite stream of multiple periods, when you say that you want to make the most of profits, which profit(s) are you talking about? Make the most of near-term profits often involves less-than-optimal far-term profits,


(2) Reduce costs:


Financial manager’s major goal of reduce costs is an inappropriate goal because there is a perceptibly bad way to finish this stop doing business. Although The financial manager main tasks of a Finance Manager includes setting up financial goals, planning strategies to reach these goals, keeping a high check on profits and loss, preparing financial reports, investing funds, monitoring cash flows, advising the rest of on mergers and acquisitions, accounting and auditing, developing certain kind of measures in order to reduce financial risk and establishing lending criteria. In short, financial managers handle all the financial dealings and accounts of the company.


The whole lingo is to add value to the company by setting the right financial goals. They handle all the financial accounts with rigorous auditing. They decide on how much of the company's profits should be returned into investment and also how much should be reinvested into the organization. Financial managers are pillars to your new organization or a step to the growth of your organization.






(3) Make best use of market



The main mission of a financial manager is to supply investment advice along with financial planning services. Make best use of market share is an inappropriate goal because there is also a perceptibly bad method to complete this give your invention away for free.


Basically the financial manager helps the consumer to make best use of their net worth through correct asset distribution.


Financial managers frequently use stocks, bonds, mutual funds and insurance products to execute the necessities of a client. Silence a few financial managers accept a commission compensation for the dissimilar types of financial harvest which they consult for, although "fee-based" growth is fast reputation in the market.


One of the essential services which financial managers supply is the leaving planning. The financial managers have high level data in the field of budgeting, forecasting, taxation, asset allocation, etc. Financial managers may even help their client in investing for both long term as well as short term basis.


Conclusion, The major goal of an organization's financial manager should be to realize that there is always a transaction between risk and return, he should always make use of the tools available to him in considering any new projects such as capital budgeting techniques (Net Present Value, Internal Rate of Return,) as well as simulations and sensitivity analysis to arrive at the most accurate decision.  He also needs to know how shareholders perceive risk and how they measure it so as to avoid organization problems and turn up at the ultimate goal of the firm- make the most of shareholders’ wealth




Published By:




Views: 5374

Comments are closed for this blog post

© 2015   Created by Study in Denmark.

Badges  |  Report an Issue  |  Terms of Service