Usage of Collateralized Debt Obligations (CDO) in Infrastructure Finance
Infrastructure finance is an extremely complicated and advanced field. There are many complex financial instruments related to infrastructure finance which have been created and are regularly traded between interested parties. One such financial instrument is the collateralized debt obligation (CDOs). The issuance of CDOs is the most basic way in which the principles of structured […]
Data Analytics in Commercial Banking
Commercial banking has traditionally been a relationship-driven business. This meant that the business was primarily driven by human-to-human contact. Over the years, banks have acquired the capability to store large quantities of data and then mine the data in order to discover meaningful trends. There are many modern software tools that allow banks to use […]
Pension Funds Vs. Mutual Funds
Pension funds are an investment vehicle that has a special focus on retirement. Many people think that pension funds and mutual funds are very similar. This is true to some extent. Both pension funds and mutual funds allow investors to pool their resources and hire professional fund managers to invest on their behalf. However, the […]
Lending Against Intangible Assets
Business and personal lending is dominated by tangible assets. The simple reason behind this is that they make good collateral. For instance when a person takes a mortgage, they pledge the very home that they buy even though the bank only loans out 80% of the value. Also banks include personal guarantees and ensure that […]
Why Should Central Banks Be Independent?
Last month Donald Trump fueled a debate when he called the Fed “crazy.” Political accusations started flying all across the media. However, it raised a very important point. The world realized that Donald Trump is not in control of the Federal Reserve which is the central bank of the United States. To the financially savvy, […]
Financial activities of a firm is one of the most important and complex activities of a firm. Therefore in order to take care of these activities a financial manager performs all the requisite financial activities.
A financial manger is a person who takes care of all the important financial functions of an organization. The person in charge should maintain a far sightedness in order to ensure that the funds are utilized in the most efficient manner.
His/Her actions directly affect the Profitability, growth and goodwill of the firm.
Following are the main functions of a Financial Manager:
In order to meet the obligation of the business it is important to have enough cash and liquidity. A firm can raise funds by the way of equity and debt.
It is the responsibility of a financial manager to decide the ratio between debt and equity. It is important to maintain a good balance between equity and debt.
Once the funds are raised through different channels the next important function is to allocate the funds.
The funds should be allocated in such a manner that they are optimally used. In order to allocate funds in the best possible manner the following point must be considered
These financial decisions directly and indirectly influence other managerial activities. Hence formation of a good asset mix and proper allocation of funds is one of the most important activity
Profit earning is one of the prime functions of any business organization.
Profit earning is important for survival and sustenance of any organization. Profit planning refers to proper usage of the profit generated by the firm.
Profit arises due to many factors such as pricing, industry competition, state of the economy, mechanism of demand and supply, cost and output.
A healthy mix of variable and fixed factors of production can lead to an increase in the profitability of the firm.
Fixed costs are incurred by the use of fixed factors of production such as land and machinery. In order to maintain a tandem it is important to continuously value the depreciation cost of fixed cost of production.
An opportunity cost must be calculated in order to replace those factors of production which has gone thrown wear and tear. If this is not noted then these fixed cost can cause huge fluctuations in profit.
Shares of a company are traded on stock exchange and there is a continuous sale and purchase of securities. Hence a clear understanding of capital market is an important function of a financial manager.
When securities are traded on stock market there involves a huge amount of risk involved. Therefore a financial manger understands and calculates the risk involved in this trading of shares and debentures.
Its on the discretion of a financial manager as to how to distribute the profits. Many investors do not like the firm to distribute the profits amongst share holders as dividend instead invest in the business itself to enhance growth.
The practices of a financial manager directly impact the operation in capital market.
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