Respond to…

“Financial management involves planning, forecasting, analysis andevaluation, as well as understanding legal and regulatory issues.” (Byrd, J., Hickman, K., & McPherson, M. 2013) This is important for investors and stockholders to manage. The idea behind financial management is to maximize the returns on an investors investment. Managers must create a balance sheet and decide where in an organization that monies need to be invested. To do this a balance sheet is created and decisions need to be made based off the balance sheet, then finances can be moved around the organization to maximize profits for investors.

Describe why a manager needs to understand the characteristics and importance of financial markets including their liquidity, competitiveness, and efficiency.

A financial manager needs to understand financial markets. An understanding of liquidity, competitiveness and efficiency would be incredibly important for a financial manger to know. Understanding these aspects of finance allows a financial manager to ensure that financial aspects of loans, investments, financial data are in tact and kept track of in an appropriate fashion. Knowing these aspects also helps the manager to know where funds in an organization are, and helps them decide on investments and loans.

• Interpret the function of the Financial Balance Sheet in assisting in management’s decision making process.

“A financial balance sheet is a snapshot of a company’s financial position at a moment in time. The left handed side list assets and the right-handed side list liabilities and owners’ equity” (Byrd, J., Hickman, K., & McPherson, M. 2013) The function of a balance sheet to a manager and their decision making process is important because it allows the manager to anticipate where the finances in the organization are headed. The balance sheet can answer difficult questions for the manager. Overall the balance sheet is something that you can show others why funds are moving around the organization, and why those decisions were made.

• Discuss what could happen if management does not fulfill responsibilities related to finance. Share a real world example from your own professional experience or from an external source.

If a manager fails to fulfill their responsibilities financially there are several things that could go wrong. Debt could be raised, or advertising money could fall flat, also budgets could be exhausted before the end of a quarter or a year which could impact overall sales. What comes to mind in my professional life is working for a specialty pharmacy. We were given a specific sales budget not to exceed per quarter. The financial manager under estimated our budget and we were then told that we were not allowed to continue doing lunches. This caused the business to take a hit because the sales force needed to cancel already scheduled lunches that were designed to drive business. When lunches are canceled another organization will swoop in and pick up that lunch, therefore stealing revenue for themselves.

Byrd, J., Hickman, K., & McPherson, M. (2013). 

Managerial finance

 [Electronic version]. Retrieved from https://content.ashford.edu/

Respond to…

Examine the role of management as it relates to finance in a corporation.

Financial management is an essential function of a corporation that entails the managing of a company’s resources to effectively meet its overall objectives.  Management job within a corporation is engaging in the financial decision-making process when it comes to tasks of choosing which investments to participate in and the source of the capital used for those investments (Byrd, Hickman & McPherson, 2013).  These sections of the corporation are referred to financial management and are operated by financial managers.  These individuals are usually accountable for examining various company financial data to aid in decision-making and development of strategies for financial improvements.

Explain the various aspects of finance that management must understand. 

There is great significance in understanding finance for management in order to ensure the financial success of the corporation.  The various factors of finance include planning, forecasting, monitoring and evaluating, and ensuring the establishment of financial controls.  Planning relates to the analysis of short- and long-term cash flows that go into and out of the business.  However, forecasting is considered one of the most important aspects of finance.  According to Milandru (2017), “forecasting is constituted by actions undertaken by top management in view of establishing strategical and tactical objectives for the organization, identifying economic and financial resources and the material necessary to obtain them” (p. 93).  The other three factors coincide with each other.  The monitoring, evaluating and controls are the processes put in place to quantify the method in which the other roles of management are achieved and compared (Milandru, 2017).  The combination of these functions helps a company financial operate.

Managers are responsible for the operating functions of the firm.  That includes paying the bills and collecting money owed to make sure the firm pays its debts and does not lose money.  Additionally, managers must understand the public’s demand for their companies’ goods and services.  Therefore, managers need to understand the characteristics of the financial market to include competitiveness, liquidity and efficiency in order to have the ability to make and support growth through such actions as, changes, seeking and investing in opportunities, and obtaining lines of credit. 

Interpret the function of the Financial Balance Sheet in assisting in management’s decision-making process.

There are several reports used to assess the financial health of a firm.  The purpose of the financial balance sheet is to function as a counterpart to the accounting balance sheet focuses on the tangible and intangible investments, fixed claims, and residual claims of the corporation (Byrd, Hickman & McPherson, 2013).  Without the balance sheet as an aid in the decision-making process, firms would not be able to fully assess what money is coming in and going out to make educated conclusions on current and future financial opportunities.   

Discuss what could happen if management does not fulfill responsibilities related to finance. Share a real-world example from your own professional experience or from an external source.

If managements do not fulfill its roles and responsibilities related to finance the corporation can suffer financially by incurring detrimental financial losses.  Mismanagement of a corporation’s finances can lead to inadequate expense and cash flow control, which would cause financial ruin.  Toys ‘R’ Us is a perfect example of a business that due to poor financial management went out of business in 2018.  The company ended filing for bankruptcy due to over $5 billion in debt and back taxes (Verdon, 2019).  Toys ‘R’ Us bad financial managing and decisions ultimately lead to the company closing. 

References:

Byrd, J., Hickman, K., & McPherson, M. (2013). Managerial Finance [Electronic version]. Retrieved from

https://content.ashford.edu/ (Links to an external site.)

Milandru, M. (2017). Reflections on the Role of Economic and Financial Management. Buletin Stiintific, 22(2), 91-96. https://doi-org.proxy-library.ashford.edu/10.1515/bsaft-2017-0012

Verdon, J. (2019). Lawyers Biggest Winners in Toys ‘R’ Us Bankruptcy, Top Firm Gets $56 Million. Forbes. Retrieved from

https://www.forbes.com/sites/joanverdon/2019/06/11/lawyers-biggest-winners-in-toys-r-us-bankruptcy-top-firm-gets-56-million/#2952cb13f107