Role of the Financial ManagerMost
Most successful corporations are a kluge of professional titles with each title representing defined and distinct responsibilities. Theoretically, these titles will work harmoniously in achieving common goals. And as odd as it may sound, corporations have evolved so that many of these professional titles are common across all industries. This is due to common business tasks such as bookkeeping, taxes, leadership, sales, and purchasing. While this list is either inclusive or exclusive, it proves that businesses have common practices and that there are many roles within a company that are unbounded by industry sectors.
One such role is the financial manager. While this role may be confused with an accountant, it does deserve to maintain a distinct classification. In this paper, the author will define the role of a financial manager and an accountant; then, the author will discuss the similarities and explore the differences between the two roles. According to Richard A. Brealey, "Financial managers stand between the firm's real assets and the financial markets in which the firm raises cash" (2001, pg 8). Hence, the financial manager's role is to be the internal link that allows companies to invest.
In particular, the financial manager must decide which assets to buy (the capital budgeting decision) and how to pay for the assets (the financing decision) (2001, pg 8). An accountant is concerned with "the process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments" (Marshall, 2002, pg 2). An accountant's function is purely research and analysis. Because of the importance of this information to anyone with an interest in the corresponding corporation, an accountant's work must be unbiased and represent accurate and applicable information.
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Therefore, many accountants are outsourced from other firms and may not share the same corporate goals as the company for which they provide their services. As a general rule, accountants do not make investment decisions. So what are the similarities and why might it be that accountant and financial mangers can easily swap roles? Financial managers must understand accounting principals to properly prepare their decisions, and accountants must prepare information in such a manner that will be beneficial to a decision maker, such as a financial manager.
For example, a capital budgeting decision will impact future benefits. The Financial manager hopes that an investment today will pay for itself and provide additional profits. However, investments are worthless if a company cannot be sustained for the amount of time till the rewards are expected. So, a financial manager must understand the company's financial position and history. Only then can a financial manager deem a capital purchase feasible and necessary. A financial manager's financial decision is heavily dependent on an accountant's findings.
Decisions in purchasing assets, such as leasing, buying, leveraging, and waiting, can be supported by an accountant's findings. This query is known as the financing decision. Financial position, cash flow, income statement, and changes in owner's equity, along with any other relevant information deemed necessary by the financial manager, must support the financing decision. By allowing the accountant to prepare the factual resources, corporations are instituting a system of checks and balances.
Because of this system, a financial manager in a public corporation will be forced to act responsible when making major financing decisions. The author has demonstrated the differences and similarities between a financial manager and an accountant. By doing so, the author has shown the dependence of a financial manager on the functions of an accountant and the reciprocal of the accountant's responsibility to provide accurate and relevant information to corporations. These two job functions are examples of how standardizing titles can protect corporations and the public from wrongful business practices.
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Role of the Financial ManagerMost. (2018, Sep 18). Retrieved from https://phdessay.com/role-of-the-financial-managermost/
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