Free «Principles of finance – the role of the financial manager» Essay Sample

Finance is life blood of a business and financial management is route to success. Recognition of financial managers/CFOs and their promotion to CEO position becoming quite common in business organizations.

Nowadays, CFOs are potently considered as backbone of an organization. On the other hand, current corporate finance scenario considers CFO as the best candidate for CEO position.

This essay will examine the role of the financial manager in an organization and how a CFO would be best candidate for CEO position.

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The role of financial manager:    

In the old days, duty of finance employees/managers was to book receipt and payment transactions only. With the passage of time financial transactions had been standardized and streamlined to make business activity presentable and understandable.

However, in current corporate finance scenario the things are completely changed. Now there are lots of things to consider before initiating business investments and transactions such as market competitors, market trends, internal and external capabilities, product development/ product production, and making marketable products.

These duties are performed by CFO of a company such as injecting finance to the research and development department and forecasting the expenses as well as profits (Cyriac and Bryan, 2004).

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Do you think finance departments are the best place to train future CEOs?

In the current corporate finance scenario the corporate and financial liabilities has made business management tougher. Chief Executive Officer (CEO) represents the Board of Directors (BOD) and considered as the head of business entity. He/she not only supposed to manage business/finance, make sure profits but also requires dealing with corporate and other laws of the land.

A qualified Chief Financial Officer (CFO) who has designation of CPA and/or CFA already qualifies for all pre-requisites of doing business. Therefore, I definitely think that finance departments are the best place to train future CEOs (Brewis, 1999).

Provide two actual examples of CFOs of publicly-traded companies who became CEOs of publicly-traded companies within the past 5 years:

Craig Kinyon is CPA and President and CEO of Reid Hospital & Health Care Services in Richmond, Ind. His qualification, hard work, consistency and experience have given him glory to govern the organization.

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Phyllis Cowling, FHFMA, CPA, president and CEO for United Regional Health Care System in Wichita Falls, Texas. She has worked with number of CEOs. Her experience and education make him capable to work as CEO (William, n.d).

Do these individuals have the CPA and/or CFA designations?

Both of the above mentioned professionals are Certified Public Accountant (CPA). In addition Phyllis Cowling qualification also includes Fellow of the Health Financial Management Association (FHFMA). Their education is one of the big constituents that make them eligible of becoming CEO.    

Pros and cons of hiring a CFO to be CEO:

The pros lead the race when it comes to pros and cons of hiring CFO to be CEO. Further details are mentioned below:

Pros of hiring a CFO to be CEO:

  1. CFOs are well educated and well experienced to manage a business entity
  2. CFOs possess good clutch on financial management
  3. CFOs possess good knowledge of corporate laws
  4. CFOs are good planners

Cons of hiring CFO to be CEO:

  1. CFO may lack human resource management
  2. CFO may lack marketing tactics
  3. CFO may lack production procedures   

At the end of treatise we have examined the ground realities of a business. On the other hand, the case studies of the CFOs who are transited to CEO position make it clear that CFOs can manage business better then others. Therefore, they are the best candidates for CEO position.

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