The Role of the Financial Manager in Relation to Coles Group Ltd

Managerial finance is concerned with the duties of the financial manager in the company. The financial manager’s role is to actively manage the financial affairs of any type of business, whether financial or non-financial, private or public, large or small, profit seeking or not for profit. They perform varied tasks such as:

* Budgeting

* Financial forecasting

* Cash management

* Credit administration

* Investment analysis

* Funds procurement

On the diagram the numbers 1-4 represent:

Flow 1: represents cash flows received from investors, in the form of shares and bonds. In relation to Coles Group I looked at the financial structure of the company. For example in 2003, with the appointment of a new CEO, the share price reached an initial high, before dropping again in May of this year due to poor performance of Kmart and Coles. The financial manager for Coles would need to look at why the share price fell (probably due to attempted buyouts by Kohlberg Kravis Roberts and competition by Woolworths).

Flow 2: represents the application of funds received from investors into investments and working capital (long term assets). In relation to Coles Group the financial manager would have to look at the company’s weighted average cost of capital (WACC), which represents the expected average future cost of funds over the long run. For the year 2007 I calculated the WACC for Coles Group to be 12.54%. This shows that if return is less than 12.54% shareholders are likely to sell some of their holdings, forcing market prices down.

Flow 3: represents the cash inflows generated from the firms operations (net working capital) and can be in the form of operating or investing capital etc. For Coles Group the inflows could have been generated by the profits, which for Coles in the first half of 2007 was $501m, or by investments, such as the sale of Coles Myer in 2006. The financial manager would have been involved in overseeing the selling of Coles to its...