Chapter 1

CORPORATE FINANCE & the FINANCE MANAGER

CORPORATE FINANCE

- deals with the proper acquisition of cash and the efficient allocation of that cash within the corporation

- the science of corporate finance deals with managing the firm's balance sheet

- the goal of corporate finance is value maximization--- increasing shareholder's wealth

THREE BASIC CLASSIFICATIONS OF THE FINANCE FUNCTION

* FINANCIAL POLICY AND STRATEGY FORMULATION ( top level management)

* FINANCIAL MANAGEMENT AND CONTROL (middle management)

*FINANCIAL PLANNING (staff function)

THREE MAJOR DECISIONS INVOLVED IN THE FINANCE FUNCTION

*INVESTMENT DECISION- concerned with determining the total amount of assets held by the firm, the composition of these assets, and business-risk complexion of the firm as perceived by the owners and creditors

*FINANCING DECISION- concerned with determining the best financing mix or capital structure for the firm

*DIVIDEND DECISION- concerned with determining the amount of cash to be distributed to stockholders

THE FINANCE MANAGER-tasked to perform the finance function of the firm-responsible for the achievement of the firm's financial goals-oversees the overall financial affairs of the corporation

SPECIFIC FUNCTIONS OF THE FINANCE MANAGER

Analysis and Planning- deals with understanding current operations and planning for the future financial condition of the firm

Asset Management- deals with the asset structure of the firm

Financial Structure Management- deals with short term and long term debt

CORPORATE CONTROLLERSHIP & THE CONTROLLER

CORPORATE CONTROLLERSHIP-part of corporate finance

- is at the heart of executive and managerial responsibilities

- it’s a guiding philosophy how management will carry out its stewardship responsibilities

CONTROLLERSHIP DEPARTMENT

-oversees the performance of controllership functions which include the maintenance of corporate books of accounts, budget administration, internal control on disbursements, reporting, and interpretation of financial statements, tax administration, protection of assets, financial administration and government reporting

-Administers the overall planning, supervision, direction, coordination and supervises the performance of accounting, financial planning and control functions

-formulates, recommends and updates policies, guidelines, systems and procedures in the budget preparation, financial control and accounting management-prepares and implements the annual budget-ensures the proper accounting and reporting of all financial transactions-evaluates the results of the financial operations and budget performance of the firm-Prepares financial statements of the company

-Good management consists of planning, organizing, directing, controlling integrating, and measuring

-These activities are supported through the controllership function#managing accounting and payroll system#delivering timely, trusted financial information#support management decision making

- effective controllership brings together relevant information that supports result oriented performance

-controllership benefits and elements lead to improved financial management

THE CORPORATE CONTROLLER

- The Controller's Function- work of the firm's management accountant

- Covers the monitoring function - keeping the CEO informed of the performance of all departments, product sales, costs, and profits, control issues, and the impact of new government regulations on the conduct of the business

DISTINCT JOB FUNCTIONS:

- planning

- organizing

- directing

- measuring

- financial analysis

- process analysis

FUNCTIONS- key player in managing corporate financial functions; holds a central role in the development of policies and procedures- vital in establishing key standards-based frameworks for financial information and reporting- evaluates the extent to which standards are adhered to- gives effective counsel to agencies to help them meet standards and achieve their business objectives

- supports the CFO in matters relating to the internal control environment, development and maintenance of policies and procedures, control of working capital and cash

- oversees the accounting and budget department

- assesses the long-term financial health of the company

- handles external and internal financial reporting and corporate accounting

CONTROLLER'S RESPONSIBILITIES

-AUDITING -BUDGETING

-COST ACCOUNTING- FINANCIAL ANALYSIS

- FINANCIAL STATEMENTS - FIXED ASSETS - POLICIES AND PROCEDURES

- PROCESS ANALYSIS

- RECORD KEEPING - TAX PREPARATION

TRANSACTION PROCESSING

QUALIFICATIONS:

- today's Controller must be a dynamic professional, with comprehensive business knowledge and exceptional management skills, proven financial skills, strong leadership abilities

- he must be able to successfully balance diverse organizational objectives with their financial responsibilities to add value to their organization

THE CHIEF FINANCIAL OFFICER

*CONTROLLERSHIP DUTIES *TREASURY DUTIES

-backward looking part of a CFO's job

- CFO is responsible for the company's present financial condition

-CFO is responsible for presenting and reporting accurate and timely historical financial information of the company he or she works for

-decides how to invest the company's money taking into consideration risk and liquidity

-oversees the capital structure of the company and internal financing

ECONOMIC STRATEGY AND FORECASTING-CFO is not only responsible for a company's past and present financial situation, but also an integral part of a company's financial future

- CFO's duties also includes economic forecasting and modeling, trying to predict the best way to ensure the company's success in the future