11. Make a short summary of the text unit 9

Pre-reading

1. Have you ever heard about The Financial Management Association International as the global leader in developing and disseminating knowledge about financial decision making?

2. Why is it necessary to manage financial resources?

3. What do financial resources include?

1. Read and translate the text financial management

An effective financial manager must be capable of operating within the existing macroeconomic and legal environment. The financial manager must plan, manage assets and obtain funds in a market economy that is made more complex because of cycles in business activity leading to fluctuations affecting the production of goods and services, inventories, profits and cash flows. Therefore, the firm must be able to adjust to changes in the macro economy.

A financial manager must also operate within the legal environment characteristic of the business firm. The firm must be organized as a proprietorship, a partnership or a corporation. The form of organization selected will influence such matters as the ability to obtain funds, the payment of earnings to owners and their risk borne by owners. Let’s examine the legal characteristics of the major forms of business.

The sole proprietorship is a firm owned by a single person, who holds title to all of the assets and is responsible for the liabilities. The owner receives the profits or suffers the losses incurred in operations.

In the partnership there is more than one owner. The most common form of partnership is the general partnership, under which all partners are liable for the debts of the business. A limited partnership has at least one general partner who has all the rights and responsibilities of the general partners described above. The liability of the other partners, who are called limited partners, for losses and debts is restricted to the amount of his original contributions.

A corporation is a creation of law. It is a legal entity that has the right to own property, to contract debts and to engage in certain activities. The corporation is a remarkable device that permits a group of people to act and be treated as a single person. Since a corporation has a legal existence apart from its partners, the owners have limited liability.

Almost every firm, government agency and other type of organization has one or more financial managers who oversee the preparation of financial reports, direct investment activities and implement cash management strategies. As computers are increasingly used to record and organize data, many financial managers are spending more and more time developing strategies and implementing the long-term goals of their organization.

The duties of financial managers in big companies vary with their specific t titles, which include controller, treasurer, credit manager, cash manager, risk and insurance manager. Controllers direct preparation of financial reports that summarize and forecast the organization’s financial position, such as income statements, balance sheets and analyses of future earnings or expenses. Controllers also are in charge of preparing special reports for regulatory authorities.

Treasurers direct organization’s financial goals, objectives and budgets. They oversee the investment of funds, manage risks, supervise cash management activities, execute capital-raising strategies to support a firm’s expansion and deal with mergers and acquisitions. Credit managers oversee the firm’s issuance of credit, establishing credit-rating criteria, determining credit ceilings, and monitoring the collections of past accounts.

Cash managers monitor and control the flow of cash receipts and disbursements to meet the business and investments needs of the firm. For example, cash flow projections are needed to determine whether loans must be obtained to meet cash requirements or whether surplus cash should be invented in interest-bearing instruments. Risk and insurance managers oversee programs to minimize risks and losses that might arise from financial transactions and business operations undertaken by the firm. They also manage the organization’s budget.

Financial institutions, such as commercial banks, employ additional financial managers who oversee various functions, such as lending, trusts, mortgages and investments, or programs, including sales, operations or electronic financial services.

In addition to carrying all these general duties, all financial managers perform tasks unique to their organization or industry. For example, government financial managers must be experts on the government appropriations and budgeting processes. Besides financial managers must know special tax laws and regulations that affect their industry.

Financial managers play an increasingly important role in mergers and consolidations and in global expansion and related financing. These areas require extensive, specialized knowledge on the part of the financial manager to reduce risks and maximize profit. Financial managers are often hired on temporary basis to advise senior managers on these and other matters. In fact, some small companies contract out all their accounting and financial functions to companies that provide such services.

The role of the financial manager, particularly in business, is charging in response to technological advances that have significantly reduced the amount of time it takes to produce financial reports. Financial managers now perform more data analysis and use it to offer senior managers ideas on how to maximize profits. They often work on teams, acting as business advisors to top management. Financial managers need to keep abreast of the latest computer technology in order to increase the efficiency or their firm’s financial operations.