Functions of Financial Manager

Functions of financial Manager

Finance works as a blood for an organization, without finance it is not possible to run any business. Every business organization requires managing and ensuring effective use of funds and financial resources. But question is who will manage these funds. It is financial manager’s responsibility to manage funds (collection and proper use of funds). Managing funds is the main functions of financial manager.

role of financial manager

Financial Manager:

Financial Managers are those who mainly deal with financial resources and make decision about financial matters. Every decision taken by financial managers is concerning with investing and financing.

Basically the functions of financial manager can be categorized into three main functions. These are:
•    Capital structure decision
•    Investing and Financing Decision
•    Decision about dividend policy

functions of financial manager
Capital Structure Decision:

The main function of financial manager is to form an optimal capital structure for the organization. Optimal capital structure depends on the type of company and its financial capability. Capital structure means the ratio of debt and equity. Financial manager set the proportion of debt and equity for a company. It can be 50/50 ratio or 60/40, or 70/30, or 55/45, or others according to the decision of managers.

Investing and Financing Decision:

Financial managers always concern about the cost of collecting funds and the return on the invested capital. Where cost is less, fund should be collected from there. And where return is maximized with lower or moderate level of risk, funds should be invested there. So it’s financial manager’s responsibilities to make the right choice which can brings profit for the company.

Dividend Policy:

When companies make profit, a question arise there that whether profit will be distributed or not. If distributed then what proportion of profit will be distributed among the shareholders and what will be kept as a retained earnings. As a function of managing funds financial manager make decision about dividend policy.

In addition to these there are many functions/ roles that financial manager does. Some of these functions are given below:

  • Identifying what amount of funds is required for the company.
  • Managing working capital which is mainly deals with short tern asset and liabilities.
  • Cash forecasting that is forecasting of cash inflow and outflows.
  • Provides required fund to every departments of the company.
  • Ensuring optimal use of the financial resources.
  • Ensuring substantial growth of the company.
  • Buying and selling of financial assets.
  • Valuation of company’s stock.
  • Maximizing the wealth of the company by increasing the stock price in the  market.

Written by

Md. Nahian Mahmud Shaikat

Student of MBA

Institute of Business Administration (IBA)

Jahangirnagar University

Email: [email protected]

1 Comment

  1. HARINDRA S

    the explanation is simple and clear

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