Does a firm/ country need a Financial Manager?

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Yes, it is necessary that a firm or company have a financial manager. Just like having a marketing manager is necessary so is a financial manager. The financial manager has many roles to play in the maximization of a firm's funds. Finances is very critical in any firm whether private or public. Poor funds manager could cause a business to wrap up.


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Taking for instance, a country like Nigeria, the citizens especially are currently protesting against bad governance and police brutality. Though it is being tagged #EndPoliceBrutality, the root cause of Nigeria's problems and backwardness is the poor management of the nation's funds and budgets. Oftentimes, there are cases of funds embezzlement and thefts by the government officials. On the other, there are poor financial decisions everywhere starting from salaries of public servants. No investments are being made by nation to better the standard of living of its citizens.

We get to see politicians earning more of the nation's money while other sectors like the teachers are struggling. The devaluation of Naira can also be attributed to poor financial decisions by the nation's leadership. Assuming this nation has a financial advisor or should I say take financial advice, the nation won't have to be piling up debts everywhere. The importance of a good financial adviser cannot be over-emphasized.


Coming back to the bone of contention here, the functions of a financial manager includes investment decisions, financing decisions, dividend decisions and asset structure management decisions. All of these functions are very important but the investment decision is the most important of all. Right investment decision is very critical for a firm's growth and expansion.


Having determined what assets to invest in, the next decision the firm needs to take is the financing decision. This is where the firm needs the services of the financial manager. In taking this decision, the financial manager, whether in the private or public sector of the economy, examines th following:

  • what is the financing mix or capital structure of the economic unit concerned?
  • will the funds be borrowed?
  • will the funds be raised through the issue of shares?
  • is the investment short term, medium term or long term in nature?
  • will the funding option chosen increase or decrease the cost of funds to the firm?
  • what effects will the sources and cost of funds have on the overall valuation of the firm?
  • will the investment improve or reduce the market price of its shares?

Answering this will then result in the adoption of the best financing approach of the firm. In all, the financial manager should try to obtain the best mix of financing alternatives or capital structure which will minimize risk and maximize returns. Having a good return on investment is what is of concern and the real purpose for the investment.

Concerning asset structure management decision, the financial manager determines the types and composition of current and fixed assets required by the firm to achieve its objectives as well as works out replacement programmes of th assets structure.

Moreover, all the above stated functions can only b executed by a financial expert. Also, these functions of the financial manager are carried out while carefully balancing the profitablity and risk components of the firm. The appropriate risk return trade-off needs to be determined in order to maximize the market value of the firm for its shareholders.

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