FINANCIAL MGMT. & MGMT. ACCOUNTING 2. Acquisition of funds: After making financial planning, the next step will be to acquire funds. There are a number of sources available for supplying funds. These sources may be shares, debentures, financial institutions, commercial banks etc. The selection of an appropriate source is a delicate task. The choice of a wrong source for funds may create difficulties at a larger stage. The pros and cons of various sources should be analyzed before making a final decision.
3. Investment of funds: The funds should be used in the best possible way. The cost of acquiring them and the returns should be compared. The channels which generate higher returns should be preferred. The technique of capital budgeting may be helpful in selecting a project. The objective of maximizing profits will be achieved only when funds are efficiently used and they do not remain idle at any time. A financial manager has to keep in mind the principles of safety, liquidity and soundness while investing funds.
4. Helping in valuation decision: A number of mergers and consolidations take place in the present competitive industrial world. A finance manager is supposed to assist management in making valuations etc. For this purpose, he should understand various methods of valuing shares and other assets so that correct values are arrived at.
5. Maintain proper liquidity: Every concern is required to maintain some liquidity for meeting day to day needs. Cash is the best source for maintaining liquidity. It is required to purchase raw materials, pay workers, meet other expenses etc. A finance manager is required to determine the need for liquid assets and then arrange liquid assets in such a way that there is no scarcity of funds.
Changing role of finance manager
The changed business environment in the result part has widened the role of a financial manager.
The increasing pace of industrialization, rise of larger scale units,
innovations in information processing techniques, intense competition etc have increased the need for financial planning and control.
The size and extent of business activities are
dependent upon the availability of finances. Financial reporting may be used as a technique for control. In the present business context, a financial manager is expected to perform the following functions.
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