Financial Management

In business, financial guidelines determine how money is raised and spent. Although raising and spending money may sound simple, financial decisions affect every aspect of a business – from how many people a manager can hire, to what products a company can produce, to what investments a company can make.

Financial management is in general a combination of accounting and economics. First, financial managers use accounting information (balance sheets, income state­ments, statements of cash flows) to interpret and to analyze it, in order to plan, and allocate financial resources for business firms. Second, financial managers use economic principles to guide them in making financial decisions that are in the best interest of the firm. Economics provides the structure for decision- making. In other words, finance is an applied area of economics that relies on accounting for input.

To be a financial manager is both difficult and interesting. Financial managers are central to most businesses, because finance is involved in the question of what adds value to a business. Speaking about the functions of the financial managers we should mention that they measure the firm's performance, determine what the financial consequences will be if the firm maintains its present course or changes it, and rec­ommend how the firm should use its own assets. Financial managers also locate external financing sources and recommend the most beneficial mix of financing sources, and they determine the financial expectations of the firm's owners. The value of the firm is determined by whatever people are willing to pay for it. The more valuable people think the firm is, the more they will pay to own it. Then the existing owners can sell it to investors for more then their original purchase price, thereby increasing current stockholder wealth. The financial manager’s job is to make decisions that will cause people to think more favorably about the firm and, in turn, to be willing to pay more to purchase the business. As financial markets become more international, the chief financial officer has to manage global financial affairs of the firm.

Also it is very important for financial managers to be able to communicate, analyze, and make deci­sions based on information from many sources. To do this, they need to be able to analyze financial statements, forecast and plan, and determine the effect of size, risk, and timing of cash flows.

Financial managers work closely with other types of managers. For instance, they rely on accountants for raw financial data and on marketing managers for information about products and sales. Finan­cial managers coordinate with technology experts to determine how to communi­cate financial information to others in the firm. Financial managers also provide advice and recommendations to top management, taking into account the following variables: gross national product, demand and supply, inflation and disinflation.

Exercise 7. Read the text once again and find key words in every passage.

Exercise 8. Read every passage once again and express its contents in one sentence.

Exercise 9. Translate the sentences into English. Review grammar in §2 of grammar supplementary:

1. В следующем году мы сможем заработать и потратить деньги.

2. Тебе следует внимательно изучить балансовый отчет, отчет о доходах и отчет о движении наличности.

3. Он должен был вчера изучить финансовые последствия.

4. Они должны поддерживать существующий курс, если хотят добиться хороших результатов.

5. Думаю, он сможет спрогнозировать результаты деятельности компании на ежегодном собрании совета директоров.

6. Вам не следует передавать эти данные.

7. Ему не удалось управлять глобальными финансовыми делами корпорации.

8. Ей разрешено распределять финансовые ресурсы.

9. Им следовало бы принять это решение в прошлом году.

10. Финансовому менеджеру следует работать с бухгалтерами, экономистами и маркетологами.

Exercise 10. Analyze the schemes of organizing a typical corporation and organizing the finance team. Make the presentation “It is both interesting and difficult to be a financial manager”. Use in your presentation the following stages and phrases:

I stage: identifying yourself:

Let me introduce myself to you.

My name is …

I am from …

I have been working for this company for … years

II stage: preparing the audience:

I am going to divide my review into … areas.

I’d like to start with …

Then I am going to move on …

I am planning to finish with …

III stage: presenting the body of the material:

Firstly, … secondly …

Talking about … it is worth mentioning …

Now, let’s move on to …

At this point we must consider …

Finally …

IV stage: closing:

Now, I’d like to summaries the main points again.

That’s all I have to say so far.

Thank you for your attention.

If there are some questions, I am ready to answer them.