Managing risk and seeking profitable investments with low risk are important aspects of the financial manager’s responsibilities.įinancial managers must collaborate with other personnel to ensure the efficient operation of the firm. The financial manager must ensure the liquidity of funds and aim for earnings from investments. To optimize the utilization of idle funds, organizations often engage in short-term Investment of Fundsįinancial managers need to make decisions regarding the short-term investment of funds. The process of raising funds involves complex procedures that the financial manager must navigate and fulfill. The financial manager must be aware of the interest rates associated with the funds being raised. This decision should align with the financial needs and demands of the organization. Raising of FundsĪfter identifying and planning, the financial manager must decide how and where to raise the necessary funds. The financial manager needs to identify the most cost-effective and desirable sources for financing. These sources can include banks, financial institutions, specialized financial and investment companies, insurance companies, bonds, shares, and personal sources. The financial manager needs to determine the dollar amount that appears above the double lines on the left-hand side of the balance sheet, representing the size of the firm. Visualize the firm’s balance sheet, with liabilities and owners’ equity on the right side and assets on the left side. It begins with determining the total amount of assets needed to be held by the firm. The investment decision is the most important of the firm’s three major decisions. Investment Decision – Where to invest funds and at what amount? The decision function of financial management can be broken down into three major areas: investment, financing, and asset management decisions.
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