The Role of Financial Manager and Basic Concepts of Present Values

The Role of Financial Manager and Basic Concepts of Present Values

In simple terms the Chief Financial Officer (CFO) role is plain and straight forward, your CFO handles the money. They create budgets and financing strategies. They figure out if it’s better for your business to lease or buy. Then they build control systems that monitor your company’s financial health (Robbins, 2006). The role of "CFO" isn't just under pressure--it's getting out of control, replete with restatements, corporate mergers and accounting scandals. Add never-ending pressure to cut costs and grow revenue. And every public company CFO's least-favorite pastime: babysitting the latest group of activist investors (Master, 2008).

Some CFOs may view their growing list of responsibilities as a step toward becoming the CEO, but that's often just wishful thinking. In many cases, the additional work simply distracts CFOs from their core finance responsibilities while undermining their performance and reducing their chances for advancement. This paper will be divided into two sections. Part 1 will discuss both the positive and negative aspects of hiring a CFO to be a CEO plus whether or not finance departments are the best place to train a CEO. Then Part 2 will highlight and display a few examples of present value as a criterion for investment decisions.

Part 1. The Chief Financial Officer

Both the CEO and CFO have a symbiotic relationship since both positions rely on each other redundantly. The company’s CFO, is responsible for establishing his/her controls of the company through the CEO’s vision or the mission statement for the organization that will be used as the basic guidelines or the policies in order for the organization to accomplish its missions or goals. Today many companies see CFOs as strategic partners, helping to build shareholder value. That is why we are seeing more CFOs having the opportunity to become CEOs. Hence why finance departments would make an ideal...