The lower portion of the organizational chart in

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Unformatted text preview: nction typically evolves into a separate department linked directly to the company president or CEO through the chief financial officer (CFO). The lower portion of the organizational chart in Figure 1.1 (on page 7) shows the structure of the finance function in a typical medium-to-large-size firm. Reporting to the CFO are the treasurer and the controller. The treasurer (the chief financial manager) is commonly responsible for handling financial activities, such as financial planning and fund raising, making capital expenditure decisions, managing cash, managing credit activities, managing the pension fund, and managing foreign exchange. The controller (the chief accountant) typically handles the accounting activities, such as corporate accounting, tax management, financial accounting, and cost accounting. The treasurer’s focus tends to be more external, the controller’s focus more internal. The activities of the treasurer, or financial manager, are the primary concern of this text. If international sales or purchases are important to a firm, it may well employ one or more finance professionals whose job is to monitor and manage the firm’s exposure to loss from currency fluctuations. A trained financial manager can “hedge,” or protect against such a loss, at reasonable cost by using a variety of financial instruments. These foreign exchange managers typically report to the firm’s treasurer. Relationship to Economics marginal analysis Economic principle that states that financial decisions should be made and actions taken only when the added benefits exceed the added costs. The field of finance is closely related to economics. Financial managers must understand the economic framework and be alert to the consequences of varying levels of economic activity and changes in economic policy. They must also be able to use economic theories as guidelines for efficient business operation. Examples include supply-and-demand analysis, profit-maximizing strategies, and price theory. The primary economic principle used in manageri...
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This document was uploaded on 01/19/2014.

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