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Finance

The Goals and Functions of Financial Management

We strive to maximize shareholder wealth through solid profitable growth and effective use of capital. ýSpecific financial goals are to achieve:ý
ý1.ý at least 30 percent of sales from products introduced during the last four years
ý2.ý growth in earning per share of more than 10 percent per year on average
ý3.ý growth in economic profit exceeding earnings per share growth, and return on invested capital ýamong the highest of industrial companies.ý

In order to achieve these goals, the financial manager must:ý
ý1.ý Manage their company's global affairs
ý2.ý React quickly to changes in financial markets and exchange rates flactuations

The field of Finance

The field of Finance is closely related to economics and accounting, and financial managers need to ýunderstand the relationships between these fields.ý

Economics provides a structure of decision making in such areas as risk analysis, pricing theory ýthrough supply and demand relationships, comparative return analysis, and many other important ýareas. Economics also provides the broad picture of the economic environment in which corporations ýmust continually make decisions.ý

A financial Manager must understand the institutional structure of the Federal Reserve System, the ýcommercial banking system, and the interrelationships between the various sectors of the economy.ý

Economic variables such as gross domestic product, industrial production, disposable income, ýunemployment, inflation, interest rates, and taxes must fit into the financial manager's decision model ýand be applied correctly.ý

Accounting is sometimes said to be the language of finance because it provides financial data through ýincome statements, balance sheets, and the statement of cash flows.ý

The Financial manager must know how to interpret and use these statements in allocating the firm's ýfinancial resources to generate the best return possible in the long run.ý...