The Role of Financial Management Financial managers play an important role in the development of modern company.

This is not like this before. Until about mid-early 1900s, the main task of financial managers is to raise funds and manage their company's cash position In the era of the 1950s, increasing acceptance of the concept of presetn value of encouraging fund managers to expand their responsibilities. Now, various external factors have an increasing impact on the financial manager. Companies that increasingly severe competition, technological developments, volatility in inflation and interest tinkat, worldwide economic uncertainty, fluctuating exchange rates, various changes in tax laws, and ethical problems for some certain financial agreements, must be handled almost daily. Financial managers who work well in the future will need to add metrics to different job postings of new methods that encourage the role of uncertainties and various assumptions. These new methods will try to assess the flexibilities contained in the various actions. If you become a financial manager, your ability to adapt to change, raise funds, invest in assets, and manage wisely, will affect the success of your company. When economic needs are not met, the funds allocated to this one will destroy society. So, by acquiring, financing, and managing assets efficiently, financial managers contribute to the company as well as life and overall economic growth.

Financial Management In connection with the acquisition, financing and asset management with some common goals as a background. Thus, the function of financial management decisions can be divided into three main areas: investment, financing and asset management.

Investment Decision

Investment decisions is the most important of the three decisions over when the company wants to create value. It begins with the determination of the total number of assets that need to be owned by the company. Imagine your company balance dipikiran for a moment. Imagine the liability and equity owners listed in the right side of the balance sheet and assets left. Financial managers need to determine the amount of money on the two bottom lines on the side of the balance sheet. Even this amount is known, the composition of assets still to be decided as well. For example, how much should the company's total assets in cash or invest in stocks, and vice versa should not be ignored. Assets that can no longer be economically justified may be reduced, eliminated, or replaced.

Funding Decision A second Important decision in accordance with decisions of company financing. In terms of funding decisions, managers associated with the improved balance sheet side. If you look at the mix of funding from Various Companies in Different industries will from you guys see striking differences. Some companies have a debt in relatively large amounts, while Others Are Almost free from debt. Corporate dividend policy should also be considered as part of the company intergal corporate financing decisions. Menetapakan dividend payout ratio in the amount of profit that can be retained within the company. The longer the amount of retained earnings that the company currently means the less money will be available for paying dividends today. The value of dividends paid to shareholders karenanyaharus balanced by the opportunity cost / opportunity cost of retained earnings are not distributed as a means of financing through equity. Once the mix of funding has been determined, financial managers still must determine the best way to physically get the funds. Mechanism to obtain short term loans, how to enter the long-term lease agreements, or negotiations for the sale of bonds or shares, should be understood by financial managers.

Dividend Payout Ratio Cash dividend divided by annual earnings or dividend income per share divided persaham. This ratio indicates pesentase corporate profits paid to shareholders in cash.

Asset Management Decision The third important decision for companies is the decision regarding asset management. When assets have been obtained and appropriate funding becomes available, these assets still must be managed efficiently. Financial managers charged with a variety of operational responsibility for a variety of existing assets. This responsibility makes financial managers to be more concerned than the current asset management fixed assets. A large number of responsibilities for the management of fixed assets in the hands of operational managers who use a variety of these assets.

COMPANY GOALS Efficient financial management requires the existence of multiple goals or targets, for assessing whether a decision to finance an efficient or not should be based on some specific standards. Although various objectives may be established. We assume that the company goal is to maximize the welfare of the owners of existing Vendor. Ownership of common stock is evidence of ownership in the company. Welfare of the shareholders represented by market price per common shares the company to the contrary is a reflection of investment financing, and corporate asset management decisions. The idea is that the success of business decisions ultimately must be judged from the effect on stock prices.

Value Creation Often, the maximization of profit and is offered as an appropriate goal for the company. However, under this goal, one manager can show increased profits by issuing stock and using the proceeds to invest in securities, similar to the SBI, which was issued by the U.S. government, the Treasury bill. For most companies, this will decrease the income of each owner of the company caused by falling earnings per share. Therefore, Maximizing EPS is often regarded as an improved version of the maximization of profit. However, maximization of EPS is not really an appropriate goal because it does not specify the time or the period of expected returns. Does the investment projects which will generate returns $ 100,000 in five years from now more valuable than projects that will generate returns $ 15,000 per year over the next five years. The answer for this question is dependent of the time value of money for the company and to investors on margin. Very few shareholders who will support projects that promised its first return in 100 years, no amount of repayment. Therefore, our analysis must consider the pattern of repayment. Another mistake from the goal of maximizing EPS, which is also an error in the measurement of return experienced by the other traditional, such as return on investment is a risk that is not taken into account. Some proyak much riskier investment than other projects. As a result, the prospects for the flow of EPS will be able to become far more risky if a project like this taken. In addition, the company's high or low risk also depends on the amount of debt associated with equity in their capital structure. Financial risk also contributed to the overall risk faced by investors. Two companies may have same EPS estimate, but if the flow of profits from one of these companies have more risk than other companies, the market price per share, the company will be lower.

This last goal does not allow the effect of dividend policy on stock market prices. If the only purpose is to maximize EPS, the company will never pay dividends. Companies can only increase the EPS to increase retained earnings and invest it in whatever level of positive returns, although small. During the payment of dividends is expected to affect share value, maximization of EPS alone will not be a satisfactory goal. Based on these reasons, the purpose of the EPS becomes not the same as maximizing the price of the stock market. Stock market prices reflect a special assessment of all market players in the value of a company. Assessment shall take into account the current EPS and EPS estimates in the future, time, period, and the risk of these earnings, the company dividend policy, as well as many other factors can affect the price per share. The market price serves as a barometer of business performance, price performance demonstrates how well the management side so far on behalf of the shareholders. The management is constantly under review. The shareholders are not satisfied with the performance management side can sell their shares and invest in other companies. This action, if carried out by other shareholders who are dissatisfied, will put pressure on the market price per share. So the management should focus on creating value for our shareholders. This makes the management must assess a variety of investments, funding, and alternative asset management strategies related to its effect on shareholder value. In addition the management should also pursue the product market strategies, for example by building markets or increase customer satisfaction, only if these things will also enhance shareholder value.

Profit Maximization Maximizing profit after tax Earnings Per Share

Earnings after tax (EAT) divided by the number of common shares outstanding

Agency problems Has long been recognized that the separation of ownership and control of modern companies resulted in the potential for conflict between owners and managers. Specifically, the objectives of the management may vary from the goals of the company's shareholders. Within large companies, shares can be owned by too many shareholders so that they can not even reveal their purpose, and therefore they have little control or influence over the management. Thus, the separation of ownership from management, will create a situation that allows management to act for its own interests rather than to the interests of its shareholders. We can assume the management as an agent of the owner. The shareholders, in the hope that agents will act in the interest of the shareholders, delegating decision-making authority to them. Jensen and Meckling is the first to develop a comprehensive theory of the firm in agency situations. They show that prisipal, in our case the shareholders can persuade themselves that the agent will make optimal decisions only if given intensive and only if the agents in the eye. Incentives could include stock options, bonuses, and additional income, and all these things must be directly related to how closely the decisions of management with shareholders interests. Supervision is done by binding agents, are systematically reviewing the additional income to the management, audit reports and limit the management's decision. Various supervisory activities are certainly involve costs, which are an inevitable consequence of the separation of ownership and control company. The less the percentage ownership of the managers, the less they act consistently acted to maximize the welfare of the shareholders and the greater need for supervision over the activities of the management for its shareholders. Some people suggest that the primary supervision of the managers did not come from the owners, but from the managerial level of the labor market. They

argue that efficient capital markets provide a variety of signals about the value of securities paerusahaan, and ultimately on the performance of its managers. The managers who have a record of good performance will more easily find jobs in other companies than the record of underperforming managers. So, if the managerial labor market competitive level both inside and outside the company, then the market will tend to discipline tersebur managers. In such situations, the various signals given through a change in the total market value of securities firms become very important. True Responsibility Manager The Company is a good institution. However, the company has a weakness, which is essentially a conflict of interest. Control of the company's resources in the hands of top-level managers who of course will pursue their interests at the expense of all other interests. Economists call this as the principal agent problem is not just one set only, but there is a very long relationship between them. Principal agent problem exacerbated by two other things, namely: information asymmetry and the barriers to collective action. Company managers to know more about what is happening in the business of the company than others and have an interest to keep at least this information for themselves. On the other hand, scattered shareholders have little incentive to act, because they will have to share profits with other parties, while the costs they must own. The result is a chronic vulnerability of the company's managerial ketidakkompetenan, the search for self-profit, fraud or deviant behavior that is harmful. In practice, there are five ways (which are interconnected) to reduce the risk of this. First Market discipline, because failure akhinrnya will weed out the managers of the company. Second Is an internal examination, the independent directors or voting requirements by

the stockholders of the institution.

Third Are regulations governing the komposisis councils, business structure and reporting requirements.

Fourth Is of transparency, including accounting standards and independent audits. Fifth Actually, only the values of an honest relationship. Economists are very uncomfortable with opinions relating to morality. But apparently it has a rather clear meaning in the context of business. Morality includes acting honestly despite the dishonest act will be profitable. This kind of morality is important in all relationships representation. Without morality, the cost of supervision and control becomes greater. In this limit, the transaction and certain long-term relationship to be not possible and people will remain poor. The managers of the representatives. So also with the managers of the fund. The more they see themselves as such (and thus perceived), the less likely they will use the opportunity created by the conflict of interest in the company.

Agent The people who were given authorization or authority by others, referred to as prisipal, to act on behalf of that person.

Agency Branch of behavioral economics associated with the principals and their agents. Social Responsibility

Maximizing shareholder wealth does not mean companies should ignore social responsibilities, such as protecting the customer, pays fair wages to employees, maintaining fair employment practices and safe working conditions, helps education and involvement in environmental issues, such as air and water net. It is appropriate for the management to consider the interests of stakeholders other than shareholders. These stakeholders include creditors, employees, customers, suppliers and the communities around where companies operate, as well as other parties. Only through attention to the various stakeholders a legitimate company alone can achieve the end goal untul maximize the welfare of the shareholders. Many people feel that the company has no choice but to act in ways that are socially responsible. They assume that the welfare of the shareholders themselves dependent on the actions that companies are socially responsible. Therefore the criteria of social responsibility is not clearly defined, form a consistent policy difficult to do. Corporate Governance Refers to systems that require the companies managed and controlled. These systems across a variety of relationships the company's shareholders, board of directors and senior management. These relationships provide a framework for setting goals and monitoring company performance. individuals who are the major key: first: ordinary shareholders second: the board of directors third: executive officials. Board of directors liaison between stockholders and managers the potential to be the most effective instrument for corporate governance. Three categories of

Role of the Board of Directors Board of directors set the overall corporate policy and provide various suggestions on the CEO and senior executives who manage the daily activities of the

company. The Board reviewed and approved the most important investment strategies, and acquisitions. In America board members typically have 10 or 11 persons and companies domiciled CEO as chairman of the council.

Setting Financial Management Functions Whether you drive your business career in the production, marketing, accounting, or finance, is important for you to understand the role of financial management in play in corporate operations. As head of the three major functional areas of corporate, finance director, are usually responsible to the president or CEO, Inside large companies, financial operations are overseen by the CFO is divided into two parts one of which the treasurer.

Summary Financial management related to the acquisition, financing, asset management and keeping in mind some general goals in all actions. The decision in the financial management functions can be divided into three main areas: investment, financing and asset management decisions. The market price of company stock represents a real assessment of the value of a particular company. Assessment shall consider the earning per share. Agency theory states that managers, particularly in large companies have different goals from the goals of shareholders. Welfare maximizing shareholder does not absolve the company in social responsibility . Good corporate governance is a system that requires companies managed and controlled.

In the big companies usually finance function is the responsibility of finance director is responsible to the CEO.