OBJECTIVE FOR A MANAGER IN THE ACCOUNTING AND FINANCE FIELDS
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Managers in any accounting and financial fields have the obligation to ensure execution of the roles in each of the field to ensure effective organizational performance. For example in the field of financial management, the managers have to facilitate efficient as well as effective management of funds to such a way as to accomplish the objectives of the firm. The managers in the financial field have to facilitate the execution of various function that entail raising of capital and planning how to allocate the capital also known as capital budgeting for both long term and short term resources like current liabilities as well as dividend policies of the share holders.
On the other hand, the managers have the obligation to facilitate accounting management which is the practical application of management techniques to ensure control and report on the financial health of the company. In this case, the managers have to ensure the analysis, planning, implementation and the control of programs that are structured to provide financial data reporting for managerial decision making. Therefore in order to facilitate effective and efficient execution of financial and accounting function there are various objectives that managers are obliged to accomplish and these include; purposeful behavior, Total Firm Value Maximization, profit maximization, Value Maximizing and Social Welfare, Value and Tradeoffs through Time.
In regard to purposeful behavior objective, this entails the manager of the organization purposing to make decision on whether to make profit by increasing market share or by obtaining more of one product only by giving up one product. According to Jensen (2010) “this behavior is based on the increase of expenditure on R&D as well as advertising or reducing the price of products to increase the general market share.” In regard to total value maximization, the managers have the obligation to maximize the sum of the market value of the equity; debt as well as any other contingent clamors outstanding on the organization which also help them to make optimal tradeoffs among numerous stakeholders. In this case, the managers have to determine the additional dollar of resources to satisfy the desires of each stakeholder if only that stakeholder values the result at more than a dollar. Besides, total value maximization helps managers to understand maximization of social welfare which facilitate the balance between various market players like monopolies among others.
In regard to profit maximization, the managers have to balance all business variables to increase the cash inflow based on the cash outflow. In this case, according to Jensen, (2010) “the managers make decision on how to take the resources out of the economy in the form of labor, material or capital from the price of their ownership in single markets” and the same inputs are then used to produce outputs or products and services back into the economy which in turn increases the total welfare in regard to the price at which the products are sold would be able to cover all the costs. In this case, if the value of output is more than the value of inputs, then profit maximization leads to efficient returns. Furthermore, in regard to Value and Tradeoffs through Time, it is essential for the managers to know whether the future outputs will be valuable enough to counter the cost of having people provide their labor, material and capital inputs presently.
On the other hand, some of the challenges managers face in efforts to be ‘socially responsible include; resource investment whereby at times it becomes difficult to convince shareholders or other key decision makers to allocate resources to a program that sis intended to benefit other things than the organization ( Letza, Sun & Kirkbride, 2004). Another challenge is the integration of the company whereby stockholders fail to embrace as well as support corporate social responsibility programs and also the timing when the program can be introduced. Another challenge is communication whereby managers of some businesses do assume that the customers aware about the products and investments which affects the targeted beneficiaries of corporate social responsibility programs and lastly the identification of the benefits which can benefit the organization when the company faces crisis.
On the other hand, a self serving manager might exploit social responsibility for his or her own personal gain by implementing the following; first is through measuring divisional performance where the manager can use to affect the performance measure. Secondly, Closing Thoughts on the Balanced Scorecard and Value Maximization which help managers understand what creates value in their business which not only impact their performance but also those of other employees and the organization at large( Letza, Sun & Kirkbride, 2004). For instance, both budgeting process and strategic management accounting tools facilitate a shareholder centric focus by ensuring effectiveness in the way cash is spend on various projects and also providing an assessment on the most profitable projects with their costing which provide the shareholders with credible information on the returns that would accrue from their investments.
The key mechanism that can help to bind managers’ interest to those of shareholders or stakeholders is “honoring individual dignity and promoting overall welfare” this would ensure that the stockholders are recognized and their welfare is addressed which would facilitate binding the interest of the two parties. Finally, in regard to the level of organizational transparency, having a positive Net Present Value can be perceived as either increasing value to the said stakeholder’s interest or it might be the stakeholder’s failure, besides, transparency within organizations can culminate in the reduction of the incentives meant for stockholders, which would lead to firm passing up positive Net Present Value projects, that at times can require external funding.
Lastly, based on my researched organization which is American Express company, the firm applies both finance and accounting managerial principles to facilitate profitability and also capital budgeting and which determine the health of the organization that gives stockholders the confidence to invest in the company. Some of the recommendation from American Express Company includes; differentiation of both financial and managerial accounting and the information that financial and accounting managers need to make short term and long term decisions.
Jensen, M.C. (2010) ‘Value maximization, stakeholder theory, and the corporate objective function’. Journal of Applied Corporate Finance, 22 (1), pp. 32-42.
Letza, S., Sun, X. & Kirkbride, J. (2004) ‘Shareholding versus stake holding: a critical review of corporate governance’. Corporate Governance, 12 (3), pp. 242-262.