THE ROLE OF FINANCIAL MANAGEMENT IN A COOPERATE ORGANIZATION

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THE ROLE OF FINANCIAL MANAGEMENT IN A COOPERATE ORGANIZATION

CHAPTER ONE

INTRODUCTION

Financial management involves all activities of a financial manager concerned with raising of capital, planning cash and requirement melding the effective control of financial resources The activities could be segregated as follows :

i. Converting force caste in to plans and budgets .

ii. Planning the appropriate capital structures

iii. Raising cash from outside the business

iv. Forecasting the future availably of and requirement of cash

v. Investing surplus funds

vi. Controlling cash balances and flows in accordance with plans and with changing circumstances.

With the emergence of finance as a separate field of study the emphasis was more or less on legal matters seen as mergers formation of new company’s disposal and consolidations. With most vital problem of the firm was identification of means of raising capital for possible expansion due to increasing wave in industrialization, the mobility of funds from area of surplus to area of scarcity pose a lot of problems.

Because of the radical changes such as the one that occurred during the depression of 1930, which culminated in the failure of many business financed was re-directed to bankruptcy organizational and firms liquidity. Since most business firms’ objectives are profit maximization and firms liquidity. The search for profitability under imperfect / perfect competition continues to be the motivation to improve the wealth of the owners. This urge to improve and maximize wealth has led to the study of financial management of which attribute factors can be socialized as follows:

a. Savings

b. Business growth

c. Research and development expenses.

d. Inflation

e. Competitive etc

Based on the above background, same thoughts were given a financial management to provide skillful planning, control, and execution of financial activities. The practicing managers and interested in this subject because among the most crucial decisions of the firm are those which related to finance and therefore the need to understand financial management which provides them with conceptual and analytical insights of capital funds, and using the suppliers of funds are called the finance function of any firm.

GOALS AND OBJECTIVES /ROLES OF FINANCIAL MANAGERS

Financial this is the life wire of any business organization and is developed in 1900 since it concerns the cultural flows of money as well as any claim against money, the financial managers subsequent decisions are made in much more co-ordinate manner directly responsible for the control process. The financial managers is concerned with

a. Financial planning within the bank

b. Raising of funds

c. Allocation controlling

d. Financial controlling

e. Interpretation.

FINANCIAL PLANNING: This raising of funds involves organizing and censuring that funds necessary for carrying on the operations of the plan is available. The second fact of financial manager is the acquisition of funds. Each has certain characteristics as cost: Maturing availability, the supplier of capital. On the basis of these factors, the financial manage of the bank must determine the best mix of finance for the banking industry. Therefore, the financial manager has task of formulation and execution of suitable financial policies in the interest of the organization.

The major purpose of such policies is to plan co-ordinate, motivate and responsible for an efficient management of resource. An efficient financial manager thuds, serve as a valuable aid to the process of decision making a major contribution t pale of contribution to the pale of economic progress. The principal responsibility of financial manager involves a theory of evaluation of investment financial and dividend decisions with the objective of maximizing wealth. The financial manager studies the analytical techniques and the environment which financial decision are made.

The financial manager keeps accurate financial records, preparing reports, managing the cost position providing the means for the payment of bills, processing funds in assets, and obtaining the best mix of financial in relation to overall development of the organization. The task of financial manager is invisibly faced with problems like those of profitability, Liquidity, and risk factors, which influence both internal and external environment. Only sound financial decision based on analysis, the planning, and control activities therefore can help optimization of value of operations. Optimization of profits and share holder’s wealth is one of those guiding objectives of business enterpriser, which govern its allocation of resource and other financial manager.

The financing manager must finally be aware of the sources available financing the business and be guided by times, selection and combination of these variables. That is the financial managers dilemma and the principles dilemma is that of profitability and liquidity while suitability is the principle of time balancing between assets and liabilities, that is using short term liabilities to.

1.2 STATEMENT OF PROBLEM

There has been unappreciated increase in the quest for the answer of the following questions posed in order to clarify the duties of financial manager which is the prospective rank of a student studying fiancé. What is managerial finance Functions to the perfuming designed to accomplish pontific goals. How and when do the finance achieves the firms objective? What is the financial managers, definition of a fare-price and how is it related to his firms return and investment capital, one may logically ask, why are we interested in these cash flows, if they do not affect profit, why can their profit effect not be taken directly into account in the analysis? What tools and techniques are available to him and how does one go about measuring his performance? On a general scale do they have any operational meaning? That is how can managerial finance be used to further rational goals? Having identified these questions, the provision of the possible answers to the aforementioned question constitutes the area of consideration of this project. As stated a the financial manager must find a rational based for answering the following three question.

. How large should an enterprise be and how fast it grow?

. What should be the composition of this liability?

. In what form should it hold its assets.

The questions stated above related to three board decision areas of financial management, investment financial manager becomes important that the primary researchers caudated on a named company serves dual purpose. This not only serves as paint of the tool in answering the questions but it mainly asked to unfold the extent the financial manager of the company is executing his duty according to the project.

1.3 RESEARCH QUESTIONS

What are the method used by the company forecast additional fund needed to support the higher volume sacks and also plan for profit . What are the financial ration used on evaluation and understanding of the result of their business operation.

1.4 SIGNIFICANCE OF THE STUDY

The purpose of this project the role financial management in a corporate organization is to equip the practicing financial managers, treasures, students of finance, and readers with a basic understanding of financial decision. The financial manger carries out financial decisions maximized through the following

a. Current asset management

b. Capital budgeting decision

c. Dividend decision

d. Financial decision

A. CURRENT ASSET MANAGEMENT: Financial management has every right to manage the long-term assets, and also the duty to manage current assets efficiently to safeguard the firm against liquidity insolvency. Investments in current asset affect the firm’s profitability, Liquidity, and risk. If the firm does not invest sufficient funds in current assets, it may becomes illiquid. But it would less profitability as idle current asset would not earn anything. In order to ensure that it would not earn anything. In order to ensure that neither insufficient nor unnecessary funds are invested in current assets, infect he should develop sound techniques of managing current assets.

B. CAPITAL BUDGETING DECISION: Capital budgeting is investment decision of the firm to have its fund invested in long term project in anticipation of expected flow of future benefits over a period of years. These decisions could be either to mechanize a process, replace a machine with another modern type, selecting between two machines, production of new products or business expansion

Its features are;

1. investing current funds for future benefits

2. The period of investment which involves long term activities.

3. The potential benefit, which will accrue to the firm over a period of time.

C. DIVIDEND DECISION: The financial manager must determine the optimum dividend payment ratio. He should consider the questions of dividend stability, stock dividends and cash dividend. Financial manager must decide whether the firms should distribute all profits or retain the balance.

D. FINANCIAL DECISION: The financial manger must decide when, how, and whom to acquire funds to meet the firms investment needs. The significant issue before him is to determine the proportion of equity capital and debt capital. A proper balance will have to be struck between return and risk once the financial manager is able to determine the best combination of debt and equity, he must raise the appropriate amount through best available sources.

1.5 RESEARCH HYPOTHESIS

Ho; There are no methods that used by the company in forecasting additional funds needed to support the higher volume of sales and also plan for profits.

HI: There are methods used by the company in forecasting additional funds needed to support the higher volume of sales and also profits.

Ho: There are no financial ratio used in evaluating and understanding of the results of their business operations

HI: There are financial ratios used in evaluating and understanding of the result of their business operation

SUMMARY OF THE REST OF THE STUDY

The general ideal of this work “the role of financial manager in a corporate organization “look into the following perspectives: Chapter one gives general explanation of the subject from the historical perspective, organizational goals, statement of problem, goals and objectives, significance of the study, limitation and delimitation, and research hypothesis. Chapter two, literature review from the general overview financial ration and profit planning management of current assets, budgeting and investment analysis, managing the financial structure and management of short, medium and long term financing. Chapter three deals with the research methodology conducted and consulted from the following.

Personal interview, secondary source of data, questionnaires, hypothesis test and empirical analysis of the named company. However, chapter four deals with the discussion of results through financial ratio analysis, hypothesis testing and implicational of the results. On the other hand, chapter five looks into the summary, conclusion and recommendations respectively finally followed by bibliography, Glossary and appendix.

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