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Unit 1: Introduction to Financial Management



            1.3.1  Place of Finance Function in the Organizational Structure                      Notes

            The finance function is almost  the same in most  enterprises. The details may differ but the
            important features are universal in nature. The finance function occupies such a major place that
            it cannot be the sole responsibility of the executive. The important aspects of the finance function
            have to be carried on by  the top management i.e., the Managing  Director and the Board  of
            Directors. It is the Board of Directors, which makes all the material final decisions involving
            finance.

            Financial management in many ways is an integral part of the jobs of managers who are involved
            in planning, allocation of resources and control. The responsibilities for financial management
            are disposed throughout the organization.


                   Example:
              1.   The engineer, who proposes a new plant, shapes the investment policy of the firm.
              2.   The marketing analyst provides inputs in the process of forecasting and planning.

              3.   The purchase manager influences the level of investment in inventories.

              4.   The sales manager has a say in the determination of receivable policy.
              5.   Departmental managers, in general, are important links in the financial control system
                   of the firm.
            The Chief Financial Officer (CFO) is basically to assist the top management. He has an important
            role to contribute to good decision-making on issues that involve all the functional areas of the
            business.  He must clearly bring  out financial  implications of  all decisions and make  them
            understood.

            CFO (his designation varies from company to company) works directly under the President or
            the Managing Director of the company. Besides routine work, he keeps the Board of Directors
            informed about  all the phases of business activity,  including economic, social and  political
            developments affecting the business behaviour. He also furnishes information about the financial
            status of the company by reviewing from time-to-time. The CFO may have different officers
            under him to carry out his functions. Broadly, the functions are divided into two parts.
            1.   Treasury function

            2.   Control  function
            Treasury function (headed by financial manager) is commonly responsible for handling financial
            activities, such as financial planning and fund raising, making capital expenditures decisions,
            managing cash, managing credit activities, managing the pension fund and managing foreign
            exchange.




               Notes  The control function (headed by Chief Accountant/Financial Controller) typically
              handles the accounting activities such as corporate accounting, tax management, financial
              accounting and cost accounting.








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