The Role of Financial Managers Vis a Vis Macroeconomic Environment Essay

Tags: economy environment finance gdp interest rates senior management trade

Open, View, and/or
Download this Document

Total Length: 1576 words ( 5 double-spaced pages)

Total Sources: 5

Page 1 of 5

Executive Summary



The financial manager's role is to understand the impact that different internal and external factors will impact the company's ability to achieve its financial and market objectives. The macroeconomic environment has both direct and indirect effects on the company. The major macroeconomic variables such as inflation, interest rates, unemployment, GDP, and exchange rates can all directly influence the financial performance of the company. But these variables also impact on things like government policy, so there are indirect impacts on financial performance as well, and the financial manager also needs to understand these.



The main tool that financial managers use are complex financial models. These models seek to illustrate the impact that different variables have on the company – both internal and external variable. Forecasts are created using different macroeconomic and market variables, and these forecasts can highlight a range of different financial conditions, along with the expected impacts of different financial tactics and strategies.



Each set of tactics and strategies has its own set of consequences, and the financial manager must be able to understand these, and express them to senior management. Thus, the financial manager's recommendations cannot be based on guesswork, but on the use of complex models that clearly illustrate how different tactics and strategies will impact on the financial condition of the firm. This means understanding both how to optimize financial condition when the economy is going well and to minimize downside risk when the economic is doing poorly. The best financial managers are able to take a situation when financial conditions are not as expected, and then make recommendations based both on short-term and long-term impacts of the different decisions that are being made.



By being able to understand and express how the impact of changing variables in a highly complex environment will impact the firm. Dealing with this complexity is really one of the most important attributes of the best financial managers.



Introduction



The goal of financial managers is to optimize the financial condition of the company, and to provide recommendations for financial tactics and strategies that will help the company to achieve its financial objectives.

Stuck Writing Your "The Role of Financial Managers Vis a Vis Macroeconomic Environment" Essay?

View All Our Example The Role of Financial Managers Vis a Vis Macroeconomic Environment Essay

Have A Custom Example Essay Written

Financial analysis, budgeting, funds management and managing the organization of the finance department are all among the typical duties of financial managers (Accounting Tools, 2018). Tactics and strategies will be set out in accordance with both conditions in the internal environment and the external, the latter of which includes the macroeconomic environment. While in the past tools like budgets and financial reporting were the primary things that financial managers did, the role has evolved in recent years to incorporate more of a strategic function (Ilie, 2015). This paper will focus on the ways that the financial manager role and the macroeconomic environment intersect.



The Macroeconomic Environment



The macroeconomic environment has an impact on companies both directly and indirectly. Direct impacts revolve around changes in key macroeconomic measures, such as unemployment, inflation and the size of the economy (GDP), interest rates and exchange rates (Akers, 2017). Inflation affects the prices that companies pay for things – and what they can charge. Unemployment rates, which may be specific to regions or professions, affect budgeting for personnel, which at some companies is a critical input cost. The health of the GDP can impact on the market opportunities that exist. For example, if GDP growth in the US is expected to be slow for the next several years, the company might want to build international expansion into the strategy, which would have a significant impact on the financial manager's role. Exchange rates matter when the company operates internationally, as there are two major forms of exchange rate risk, but they also matter for domestic-only companies that buy inputs from overseas.



Then there are the different indirect impacts that the macroeconomic environment has. The macroeconomic environment is used as the basis for a lot of political policymaking, and thus the macroeconomic environment can be a strong influencer on the political environment. Regulations, taxes, employment policies and more can all be subject to change based on prevailing economic conditions, and all would affect the role of the financial manager.



Impacts on Operations



For the financial manager, it is important to….....

Show More ⇣

     Open the full completed essay and source list


OR

     Order a one-of-a-kind custom essay on this topic


sample essay writing service

Cite This Resource:

Latest APA Format (6th edition)

Copy Reference
"The Role Of Financial Managers Vis A Vis Macroeconomic Environment" (2018, March 25) Retrieved April 18, 2024, from
https://www.aceyourpaper.com/essays/financial-managers-essay

Latest MLA Format (8th edition)

Copy Reference
"The Role Of Financial Managers Vis A Vis Macroeconomic Environment" 25 March 2018. Web.18 April. 2024. <
https://www.aceyourpaper.com/essays/financial-managers-essay>

Latest Chicago Format (16th edition)

Copy Reference
"The Role Of Financial Managers Vis A Vis Macroeconomic Environment", 25 March 2018, Accessed.18 April. 2024,
https://www.aceyourpaper.com/essays/financial-managers-essay
   

Open, View, and/or
Download this Document
order custom essay example