Financial management is a specific field in finance with several types of decisions that need to be made
Financial management is a specific field in finance with several types of decisions that need to be made. Financial management is considered the cornerstone of a business’s financial status. Once of the first decisions that a financial manager should decide on is the long-term financial strategies and investments of the business. Are the long-term finances and investments good for the business? Financial managers make these decisions based on data analysis’s and informing upper management on projects that will benefit the businesses profits. Financial managers are also analyzing, preparing and producing annual financial reports that help with making forecasts.
Another role and responsibility of a financial manager is in the making of critical decisions. Some of the decisions include investment decisions, financing decisions and dividend decisions. Making these decisions allow the finance manager to make decisions for the businesses finances and disclosing to upper management the best decisions for the best profit or shareholder’s stake in the business.
Another area that financial manager need to be aware of are ethical issues. Discrimination on races during employee supervision, frauds in the market tests and analysis, financial statements and financial reporting manipulations are all areas to be aware of for ethical issues. If there are ethical issues they need to be addressed as they are detrimental to the business. A financial manager will address the ethical issues by researching sources like government agencies, trade /associations, banks and other businesses along with educational institutions for correct processes to initiate in the business. The research will help the business understand what ethical issues are and how to address them.
In 2002, the Sarbanes-Oxley Act was created so that business managers who have make business decisions are held legally accountable for any misconduct. The Act protects investors by improving the accuracy and reliability of business disclosures and makes upper managers responsible for accuracy and completion of the businesses financial reports.
The Sarbanes-Oxley Act also protects shareholders from misconduct from financial managers in the investment and dividend decisions. Federal regulations have also tightened so it is much more difficult for financial managers to hide debts, financial interests and assets from shareholders. Due to Sarbanes-Oxley Act and the other federal laws there are safeguards in place against financial managers.
Another area to discuss is a private company going public. For a business to go public from a private company the private company has to be incorporated and have a certificate of incorporation. When a private company becomes a public company, it has the ability to own property, the ability to sue and be sued, become limited liability, ability to contract, and have the ability of trading with the public. Some of the disadvantages are large investment capital and poor management.
Another area to look at is the U.S. Stock Market. The U.S. stock market is a market where the stock of businesses is traded. The U.S. has one of the largest stock markets which house two kinds of stock markets. There is the organized security exchanges and over the counter markets. One of the most known stock markets is the New York Stock Exchange (NYSE). NYSE has a combination of the organized security exchange and over the counter markets. The National Association of Securities Dealers Automated Quotations (NASDAQ) is a market where people do not buy from and selling to one another directly. The buying and selling is through a dealer while the NYSE is an auction market. In my opinion, the NASDAQ would be a better for investing because of how the marker is run.
The final area to look at is investment products. There are several ways to invest your money. You can purchase bonds. Bonds are considered a safe investment. When you purchase a bond when you turn it in after the maturity date you receive the principle balance and interest. Another option is to purchase stocks which allows you to be part owner of a business. You receive dividends when a profit has been made but it the business is not profitable you can lose money. Another option is with Mutual Funds. These can be bought from a business that specializes in this investment. Mutual funds are both stocks and bonds and allow people to invest in almost all areas of the financial markets”.