CHAPTER ONE
Chief Financial Officer's Role and Reports
ROLE OF THE CHIEF FINANCIAL OFFICER
The chief financial officer (CFO) plays a strategic role in the company's goal-setting, policy determination, and financial success. The CFO's typical title is vice president of finance (VP Finance). Unless the business is small, no one individual handles all the financial decisions; responsibility is dispersed throughout the organization. The CFO's responsibilities include:
- Financial analysis and planning: Determining the amount of funds the company needs; a large company seeking a rapid growth rate will require more funds.
- Making investment decisions: Allocating funds to specific assets (things owned by the company). The financial manager makes decisions regarding the mix and type of assets acquired and the possible modification or replacement of assets, particularly when assets are inefficient or obsolete.
- Making financing and capital structure decisions: Raising funds on favorable terms (i.e., at a lower interest rate or with few restrictions). Deciding how to raise funds depends on many factors, including interest rate, cash position, and existing debt level; for example, a company with a cash-flow problem may be better off using long-term financing.
- Managing financial resources: Managing cash, receivables, and inventory to accomplish higher returns without undue risk.
The CFO affects stockholder wealth maximization by influencing:
- Current and future earnings per share (EPS), equal ...
