Question

How would you respond to post?

The role of management as it relates to finance in a corporation is diverse and varied. Financial management involves planning, forecasting, analysis and evaluation. Financial managers also must understand legal and regulatory issues to stay in compliance. It is vital that a manager understands the characteristics and importance of financial markets including their liquidity, competitiveness, and efficiency. Like any person in a position of power, they must understand where the business stands and how they are performing. For the financial manager, they have to know how well their company is performing on a financial perspective, how they compare to their competition and how efficient they are at producing their products or services. The Financial Balance Sheet is used by management as a visualization of the financial functions of the firm and their objectives. The FBS records cash flows, the current value of the left-handed side of investments made by the firm and the current right handed side claims. Management uses this information to make decisions comparing the investments made by the corporations, and sources of financing, inducing fixed and residual claims. If management does not fulfill responsibilities related to finance the business could ultimately declare bankruptcy and must liquidate their inventory in order to pay back the money they owed. For example, Blockbuster, the famous video renting store had to claim bankruptcy in 2010. Blockbuster could not keep their claim on the home entertainment industry and ultimately went out of business due to poor decisions made by financial management over a number of years.

Answer 1

The post describes the role and importance of a finance manager in any business organization correctly. From understanding the financial health of the company by relying on data retrieved from cash flows and balance sheet to understanding the state of the economy and finance in the country, the finance manager has to be on top of all these issues to take the company forward. From knowing about regulations and how they may impact the outcome for the company, the finance manager helps the business organizations in avoiding or overcoming threats and challenges posed by the external factors in the industry. Failing to do so can lead to major problems for the company.

This was correctly surmised in the example of Blockbuster which failed to understand its financial projections and the industry and had to go bankrupt.