Describe about the Corporate Financial Management for Research Company.
A. For this research paper I would like to choose ‘DELECTA LIMITED’ (DLC) as a research company. The company is listed on ASX (Australian Stock Exchange). Delecta Limited is a major supplier of adult products such as: vibrators, games & giggles, lingerie, sex toys, books, DVDs, lubricants, videos’, and so on. Along with this, Delecta operates its business in retail, wholesale, and oil & gas sector. The retail segment of the firm trades adult products to retail customers directly. The wholesale section of DLC vends wholesale products to the wholesale customers in Australia as well as New Zealand. Moreover, the oil & gas division of Delecta incorporates an oil and gas field development project in the US (Delecta Limited. 2016). In addition to this, Calvista Australia Pty Ltd, Stell Bay Pty Ltd, Calvista New Zealand Limited, Today’s Success Pty Ltd and Canadian River Inc. are the subsidiaries of DLC. Malcolm R. Day and John Burness are the Chief Executive Officer (CEO) and CFO (Chief Financial Officer) of the firm respectively.
On the other hand, the CFO of an organization is responsible to perform numerous important roles and responsibilities to improve the organizational as well as financial performance and effectiveness of the firm in an effective and a more comprehensive manner. The CFO also plays important roles to accomplish the financial goals and objectives of the organization (Dergel, 2014). Along with this, the major areas of responsibilities of the CFO of Delecta Limited are described as below:
The chief financial officer of DLC plays a significant role to make effective financial plans to improve the financial performance of the firm in an effective and a more comprehensive manner. The CFO of Delecta makes effective financial plans to make effective utilization of available funds. Moreover, with the help of these financial plans, the firm becomes able to operate all its three segments: retail, wholesale, and oil & gas in an effective and a proper way (Moran and Kral, 2013). Along with this, the financial plans developed by CFO are also valuable in order to manage all the financial activities of the firm in an accurate way. The CFO of DLC also responsible to manage its cash inflow and outflow in order to maintain transparency in all the financial transactions of the firm. Also, the CFO of Delecta is responsible to pay taxes and duties, and securities to fulfill its financial obligations properly.
In addition to this, the CFO of DLC is responsible to develop accounting policies, procedures and guidelines for purchasing, credit, payment of bills, collections, and other financial obligations. The CFO of DLC also develops financial plans to raise the capital of the firm. For case, in order to raise the funds, all the three segments of the firm operate their financial activities in view of that. Moreover, the CFO develops provisions to execute the financial plans for the financial growth of the organization (Hitt, Ireland and Hoskisson, 2006). In this way, it can be said that, the CFO of DLC is fully responsible to create long term financial plans, assess the financial requirements and to develop different options to fulfill the financial needs of the firm in an effective and an appropriate manner.
Understand and Mitigate Financial Risk:
The CFO of an organization is fully responsible to understand and mitigate financial risks in an effective and a more comprehensive manner. It is well known that financial risk is a major part of business. Financial risk may occur at any time that may influence the financial performance of the organization in a negative manner (Lapovsky and McKeown-Moak, 2010). In this situation, the CFO of the organization develops numerous effective risk mitigation strategies to mitigate financial risks and to improve financial performance in an effective and an appropriate manner. Moreover, the CFO of DLC has in-depth knowledge of the financial systems to discover the financial risks that may occur in the financial areas of the organization. In addition to this, there are lots of financial risks that the CFO of DLC diminishes in a proper way. For case, the CFO of DLC plays a significant role in order to lessen the risks that are linked to the contract failures (Bragg, 2011). Moreover, the CFO confirms all the existing and new contracts to fulfill all the term & conditions of the contracts in order to mitigate this type of risk in an effective and an appropriate manner.
On the other hand, the CFO of Delecta also plays a significant role to diminish the risk allied to the commodity prices’ changes. The CFO creates long-term contracts and also makes use of cost cutting methods to moderate this type of risk in an effective way. The CFO is also responsible to alleviate foreign exchange risks that are related to the business (Kasunic and Kasunic, 2009). Moreover, the CFO decides the size of foreign trading and also uses hedging tactics such as: forward rate agreements, forwards contract, interest rate swaps, and so on to mitigate foreign exchange risk in an effective and an appropriate manner. In addition to this, the CFO of DLC also plays a critical role to develop and save the brand image of the firms. The negative brand image influences the overall financial performance of the business in a negative way. The CFO develops advanced strategies and pay attention on the brand to improve the brand image and to mitigate financial risk in a significant way (Ferguson, 2006). In this way, it can be said that, this is an important area of responsibility for the chief financial officer of the organization.
The CFO of an organization is responsible to develop accounting and financial functions to improve the financial performance and organizational effectiveness effectively. The CFO of DLC also develops accounting & financial functions to enhance the transparency, profitability, and raise funds of the organization. In addition to this, the CFO of DLC pays his/her attentions on the accuracy of financial information so; all the members of the organization may perform all the accounting & financial functions in an accurate manner. Moreover, it should be noted down that the CFO of DLC uses a data-mining tool to present accurate financial information to the shareholders, investors and users of the firm (Oakes and Galagan, 2011). Along with this, the CFO of DLC also uses an ongoing system to enhance the efficiency of the accounting and finance functions of business.
On the other hand, the CFO designs effective policies, methods and procedures to perform all the accounting &financial functions properly. The CFO also supervises the staff to ensure that they are performing all the accounting and financial functions in an appropriate way. The CFO of DLC uses effective accounting & financial methods such as: balanced scorecard, financial statement ratio analysis, dashboard and so on in order to improve the estimated and actual financial performance of the firm (Finn, 2016). Apart from this, the CFO of DLC also uses effective business model to generate customer value for the success and growth of the organization. The CFO plays a significant role to bring into line the staff into a project-based team so; they may perform all the accounting & financial functions to improve the financial performance of the business.
In addition to this, the responsibilities of the chief financial officer of the firm affect the ultimate goal and objective of the business. In other words, it also can be said that, the responsibilities of CFO has a positive impact on the ultimate goals & objectives of the firms. It is because of CFO is an important person of an organization who is responsible to execute appropriate financial planning for the success of the firm. The financial plans developed by the CFO are very beneficial to accomplish the strategic, financial, and competitive goals & objectives of the firm in an effective and a more comprehensive manner (Cannon, Bergmann and Pamplin, 2006). Along with this, it should also be noted down that, business organization faces a lot of problems to allocate, manage, invent and control its funds. In this situation, the CFO plays a critical role manage and control the capital as well a cash flows of the firm in an appropriate way.
On the other hand, the CFO also plays a major role to improve the transparency and eloquence in the financial transactions of the firm. The CFO also develops risk mitigation strategies to reduce financial risks and to enhance the financial performance of the firm. Moreover, the CFO of DLC plays a significant role to accomplish the financial goals and objectives in a specified time period. These all the roles and responsibilities of the CFO play a major role to achieve the goal and objectives of the business in an effective way (Hommel, Fabich, Schellenberg and Firnkorn, 2011). In this way, it can be said that, the CFO of DLC perform numerous roles and responsibilities for the growth and success of the organization. The responsibilities performed by the CFO play a crucial role to improve the financial performance and to accomplish the goals & objective of the business in an effective manner.
B. At the present time, most of the business organizations and investors focus on the effective market hypothesis to select a portfolio to gain higher profits and to reduce the level of risk in an effective way. For case, the effective market hypothesis is a market theory that explains that asset prices reflect all the available financial information of the business organizations. The efficient market hypothesis also affirms that it is unfeasible to beat the market (Sung and Kao, 2015). Along with this, the theory explains on the stock exchanges, the stocks trade at their fair value for all time. For that reason, investors cannot buy undervalued stocks and trade stocks at inflated prices. According to this theory, stock market efficiency reflects all related information of the business organizations.
On the other hand, the pension fund manager plays an important role to choose portfolio for the investors or customers. The pension fund manager also considers the effective market hypothesis theory to select a portfolio in an appropriate way (Tyson, 2016). Moreover, if the effective market hypothesis is true in that case the pension fund manager should not opt for a portfolio with a pin. It is because of a portfolio with a pin can involve high level of risk. The portfolio would not be able to offer higher returns to the investors or customers. In addition, this type of portfolio would not be able to provide higher degree of satisfaction tot the investors. In opposite to this, the pension fund manager must pick a portfolio when the efficient-market hypothesis is true and stocks are well diversified. This type of portfolio works in the favor of the investors. In other words, it also can be said that, to select a portfolio, the pension fund manager must focus on the diversified stocks and accurate market hypothesis (Brealey, Myers, Allen and Mohanty, 2012). Along with this, it should also be noted down that, a well diversified portfolio is crucial to lessen risk and to improve returns on the investments.
In addition to this, there are some specific market strategies and rules that the pension fund manager must consider to select a portfolio. For case, the manager must select a portfolio that is less risky of higher profitable to the investors. Moreover, the manager must only select a well diversified portfolio to obtain high returns on the portfolio. Also, the risk level of selected must be suitable for the investors or customers. For this reason, these rules and strategies play an important role in the selection of a portfolio (Graham and Dodd, 2008). Overall, it can be said that, the effective market hypothesis plays a significant role in order to make financial and investment decisions in an effective manner. But, it does not mean that, the manager must choose a portfolio with a pin only on the basis of the effective market hypothesis. Moreover, the pension fund manager must focus on the level of risk & returns in order to select a portfolio in an appropriate manner.
References
Bragg, S.M. (2011). The New CFO Financial Leadership Manual. UK: John Wiley & Sons.
Brealey, R.A., Myers, S.C., Allen, F. and Mohanty, P. (2012). Principles of Corporate Finance. NY: Tata McGraw-Hill Companies Inc.
Cannon, D.L., Bergmann, T. S. and Pamplin, B. (2006). CISA Certified Information Systems Auditor Study Guide. UK: John Wiley & Sons.
Delecta Limited. (2016). About Us. Available At: https://www.investsmart.com.au/shares/asx-dlc/delecta-limited [Accessed on: 10th Sep. 2016]
Dergel, S. (2014). Guide to CFO Success: Leadership Strategies for Corporate Financial Professionals. USA: John Wiley & Sons.
Ferguson, M.R. (2006). The Executive Branch of State Government: People, Process, and Politics. Australia: ABC-CLIO.
Finn, A. (2016). MBA In A Week: All The Insights Of A Master Of Business Administration Degree In Seven Simple Steps. UK: Hachette UK.
Graham, B. and Dodd, D.L.F. (2008). Security Analysis (6th ed.). USA: Tata McGraw-Hill Companies Inc.
Hitt, M., Ireland, R.D., and Hoskisson, R. (2006). Strategic Management: Concepts and Cases. USA: Cengage Learning.
Hommel, U., Fabich, M., Schellenberg, E. and Firnkorn, L. (2011). The Strategic CFO: Creating Value in a Dynamic Market Environment. USA: Springer Science & Business Media.
Kasunic, T.K.F.T., and Kasunic, F.T. (2009). Supersize Your Small Business Profits!: How to Survive the Current Recession and Manage Your Small Business Profitably During Turbulent Economic Times. Australia: Trafford Publishing.
Lapovsky, L. and McKeown-Moak, M.P. (2010). Roles and Responsibilities of the Chief Financial Officer: New Directions for Higher Education, Number 107. Australia: John Wiley & Sons.
Moran, S. and Kral, R. (2013).The Board of Directors and Audit Committee Guide to Fiduciary Responsibilities: Ten Critical Steps to Protecting Yourself and Your Organization. US: AMACOM Div American Mgmt Assn.
Oakes, K. and Galagan, P. (2011). The Executive Guide to Integrated Talent Management. USA: American Society for Training and Development.
Sung, W. and Kao, J.C.M. (2015). Environment, Energy and Applied Technology: Proceedings of the 2014 International Conference on Frontier of Energy and Environment Engineering (ICFEEE 2014), Taiwan, December 6-7, 2014. Australia: CRC Press.
Tyson, E. (2016). Investing For Dummies. John Wiley & Sons.
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