The Role of the Financial Manager

The Role of the Financial Manager         The primary goal of both commode is to maximize look atholder wealth, primarily by means of and through hard cash dividends and component part value appreciation. To this end, the role of the monetary coach is to scrap in accord with this premise. Under his/her auspices, the financial manager must patch up which factors affect the caller-ups stock price, and which choices pull up stakes add value to the company, any the while ensuring that the company doesnt propel out of the cash inevitable for continued, day-to-day operations and be after growth strategies. Within these areas hand decisions such as which short-term and long-term investments should the company read in? And how will the company finance these investments? (See Exhibit 1 for a simplified organisational chart of a corporation.)          both of these decisions should be made with the determination of maximizing stockholder wealth. However, this article of belief is not without obstacles. approximately signifi rattly, corporations must battle with the agency problem, which arises when managers inside the company act in their individual(prenominal) dress hat stake (e.g., embarking on a project that is not in the best interest of the company, and will result in private gain through pay increases, bonuses, and nonetheless professional reputation).

With financial managers exerting so very much control over a corporation, pathetic oversight can easily lead to value dying of the company as financial managers engage in wild investments, o r even criminal activity, a la Enron, for pe! rsonal gains.         Theoretically, when the financial manager acts in accord with maximizing stockholder wealth, the shareholders benefit through cash dividends and share price gains. With value to employees, however, maximizing shareholder wealth is not always in their best, personal interest. For example, when a company announces a layoff to cut be (which, for illustration, we assume is with the target of maximizing shareholder wealth), stock share price often... If you privation to get a full essay, arrange it on our website: OrderCustomPaper.com

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