Role of a CFO

FUNCTIONS OF A CHIEF FINANCIAL OFFICER

Presented by :

Ajeeth M RamananPhase I

WHO IS A CHIEF FINANCIAL OFFICER?

The senior manager responsible for overseeing the financial activities of an entire company. The CFO's duties include financial planning and monitoring cash flow. He or she analyzes the company's financial strengths and weaknesses and suggests plans for improvement.

The CFO is similar to a treasurer or controller in that he or she is responsible for overseeing the accounting and finance departments and for ensuring that the company's financial reports are accurate and completed on time.

HOW TO BE A CHIEF FINANCIAL OFFICER?

The CFO reports to the president, but has a major say in the company's capital structure, investments and how the company manages its income and expenses.

The CFO works closely with other executives and plays a major role in any company's success, especially in the long run.

Becoming a CFO requires extensive financial management experience as well as educational credentials in finance and/or accounting.

ROLES OF CHIEF FINANCIAL OFFICER/FINANCIAL MANAGER

1. Raising of Funds

The Financial Manager / CFO is the person for raising funds for the company. It is up to the Chief financial officer/ Financial Manager to assess and acquire the optimum and best way of funding for the company.

Assessing the need of the situation the financial manager would prefer Debt or Equity.


2. Understanding Capital Markets

Shares of a company are traded on stock exchange and there is a continuous sale and purchase of securities. Hence a clear understanding of capital market is an important function of a financial manager.

When securities are traded on stock market there involves a huge amount of risk involved. Therefore a financial manger understands and calculates the risk involved in this trading of shares and debentures. Its on the discretion of a financial manager as to how distribute the profits.


3. Profit PlanningProfit earning is one of the prime functions of any business organization. Profit planning refers to proper usage of the profit generated by the firm. A healthy mix of variable and fixed factors of production can lead to an increase in the profitability of the firm.

Fixed costs are incurred by the use of fixed factors of production such as land and machinery. In order to maintain a tandem it is important to continuously value the depreciation cost of fixed cost of production.


4. Allocation of FundsOnce the funds are raised through different channels the next important function is to allocate the funds. The funds should be allocated in such a manner that they are optimally used. In order to allocate funds in the best possible manner the following point must be considered

• The size of the firm and its growth capability• Status of assets whether they are long term or short tem• Mode by which the funds are raised.

These financial decisions directly and indirectly influence other managerial activities. Hence formation of a good asset mix and proper allocation of funds is one of the most important activity


5 . Dispersal of Profits

The financial manager has to decide how much to retain for ploughing back and how much to distribute as dividend to shareholders out of the profits of the company.

The factors which influence these decisions include the trend of earnings of the company, the trend of the market price of its shares, the requirements of funds for self- financing the future programs and so on.


6 . Financial Control

Evaluation of financial performance is also an important function of financial manager. The overall measure of evaluation is Return on Investment (ROI).

The other techniques of financial control and evaluation include budgetary control, cost control, internal audit, break-even analysis and ratio analysis. The financial manager must lay emphasis on financial planning as well.

FAMOUS CFO’S IN INDIA

Mr. Raghuram RajanGovernor of Reserve Bank of India and the CFO for the country.

Mr. Ganesh PChief Financial Officer of Godrej Industries


Mr. Ravi SudVice President and Chief Financial Officer Hero Corp

Mr. Koushik ChatterjeeChief Financial Officer Tata Steel


Mr. S K JoshiChief Financial Officer Bharat Petroleum Corporation Limited

Mr. Y M DeosthaleeChief Financial Officer Larsen and Tuobro Holdings

Role of a CFO

Economy & Finance

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