Chief Financial Officer - Explained
What is a Chief Financial Officer?
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
What is a Chief Financial Officer?
A chief financial officer also known as CFO refers to a senior executive financial managerial position in a company. An individual holding this position has the responsibility of overseeing all financial/accounting activities of the company. The CFOs focus is basically on keeping track of the company's cash flow, including the overall financial planning and analysis. In the financial field, a CFO holds the senior-most position.
What Does a Chief Financial Officer Do?
Basically, the CFO is required to report to the Chief Executive Officer (CEO). However, his or her input on the investments of the company, management of income/expenses, and capital structure, is considered significant. Part of the company's overall success is attributed to the CFO. The CFO of the company always works with other senior managers to ensure that the company accomplishes all of its objectives. For instance, if there are plans to launch new campaigns by the marketing department, the CFO gives advice on the available funds. This enables them to plan within that budget. The CFO may also help the CEO to do a cost-benefit analysis, forecast, as well as acquire funds for various projects.
Responsibilities of a CFO
Basically, the CFO has the duty of planning as well as executing financial functions. He or she is accountable for all the financial and accounting components in the company. They include:
- Risk Management- The CFO has a responsibility of managing risks related to investments, foreign transactions exchange rates and interest rates.
- Treasury- It is also the work of the CFO to take charge of the company's investment activities. This ensures that the extra money is put to use to help generate more income, instead of it lying idle in the bank.
- Taxation- The CFO also ensures that the process of tax preparation such as income, international, and income taxes are handled appropriately.
- Investor Relations- Note that the shareholders do not always have information on how the company is financially performing. It is, therefore, the responsibility of the CFO to inform them of any important activities in the company. This ensures that the shareholders are not in the dark, an action that ensures that a good relationship is maintained.
- Controllership- This is a responsibility that requires the CFO to oversee the accounting system including the controller of the firm. He or she provides the shareholders and other managers in various branches, with all the financial reports. They use the reports to help them to make decisions and plan appropriately.
- Internal Audit- Auditing is also another CFOs responsibility within the organization. He or she is supposed to review and analyze all the financial records, to verify their compliance and accuracy. He or she is supposed to check the financial records and verify that they actually comply with the company's set procedures.
Why Chief Finance Officer Position is important
Basically, the responsibilities of the CFO have been to ensure compliance as well as quality control in the company. However, these roles have shifted to business planning and process changes, which makes the CFO a key partner to the CEO. Note that the CFOs contribution has a greater influence on the company's strategic plans. This is because most companies rely majorly on the CFOs opinions and reports to make decisions about the company's future position. This makes CFO one of the most important positions in any given organization. Also, in some countries like in the United States, they have seen employment growth in the financial industry. This is because the country has become an international financial hub, which has made many companies experience high-profit margins. This has lead to a high demand for CFOs by companies.
Key Considerations for CFOs
There are key things that CFOs must consider when executing his roles and responsibilities. They include:
- CFOs must ensure that the information they report is accurate. This is because most of the companys decisions are made based on the data reflected in the financial reports they make. Any misrepresentation of financial data by the CFO, will, therefore, negatively affect the overall operation of the company.
- Companies rely on the CFO to manage financial activities. The CFO must, therefore, adhere to the Securities and Exchange Commission (SEC) accounting principles when executing his or her financial duties. This ensures that a company does not get itself in any form of a financial problem for not following the set accounting principles.
- In addition, there are other regulatory entities such as the Sarbanes-Oxley Act, that CFOs must adhere to. This act specifically deals with prevention of fraud as well as disclosing financial information.
In the United States, CFOs are usually hired to handle taxation issues in the local, state as well as in the federal government. The CFO basically, acts as a link between the local residents and the accounting elected officials. They also oversee any other pending issues. The CFOs also have the responsibility of formulating financial policy and also managing government funds.
- Corporate Governance Law (Intro)
- What is Business Governance?
- Berle-Means Thesis
- Corporate Governance Rating Definition
- Who are the members of a corporation?
- Corporate Charter
- Shareholder Register
- Common Stock
- Preferred Stock
- Par Value
- Authorized Shares
- Issued Shares of Stock
- Unissued Shares of Stock
- Outstanding Shares
- Institutional Shares
- Dual Class Shares
- What is a closely-held corporation?
- Close Corporation Plan Definition
- What is a Private Company vs a Public Company?
- What is the role and purpose of the corporation?
- What is the Agency theory of corporate governance?
- Shareholder-Centric Perspective
- Shareholder Value
What is the Stakeholder theory of corporate governance?
What is the role & rights of Shareholders in the corporation?
- Shareholder Democracy Definition
- Quorum Definition
- Class Voting Shareholders
- Changing the Voting Rules
- Supermajority (Voting)
- Shareholder Sponsored Proposal
- What are the variations on attributes of Ownership structure?
- Stock Split
- What are the fiduciary duties owed by shareholders?
- When is a shareholder personally liable for corporate obligations?
- Appraisal Rights
- Dissenter's Rights
- Say on Pay Rights
- How can shareholder enforce their rights (direct and derivative actions)?
- What is the process for bringing a Derivative action?
- What are corporate vote Proxies?
- Proxy Statement
- Proxy Fight or Contest Definition & Explanation
- What is Shareholder Activism and the significance of Institutional Investors?
- Activist Investor
- Overview of Board of Directors
- Board Decision Making
- Advisory Board (Observer Directors)
- What is the role of the Board of Directors?
- Board of Trustees
- Board of Governors
- Outside Director
- Outside Director or Non-Executive Director Definition
- Independent Outside Director
- Budget Committee
- Audit Committee
- Compensation Committee
- Nomination Committee (Corporate Board)
- What standards govern the actions of the board of directors?
- Duty of Candor Definition
- Board Evaluation Definition
- What is the Business Judgment Rule?
- What is D&O insurance?
- Codetermination (Foreign)
- What is the role of Managers of the corporation?
- What standards govern manager actions?
- Chief Executive Officer (CEO)
- Chief Financial Officer
- Chief Information Officer (CIO)
- Chief Investment Officer (CIO)
- Chief Legal Officer
- Chief Operating Officer
- Chief Risk Officer
- Chief Security Officer
- Chief Technology Officer (CTO)
- What are the primary state and federal corporate governance laws?
- What is the role of the state in corporate governance?
- What is the role of Securities Laws in corporate governance?
- What is the role of the Foreign Corrupt Practices Act in corporate governance?
- What is the Sarbanes-Oxley Act (SOX) effect on corporate governance?
- Sarbanes-Oxley Act (SOX)
- What is the Dodd-Frank Wall Street Reform and Consumer Protection Act effect on corporate governance?
- Corporate Monitors
- What industry organization standards affect corporate governance?
- How do proxy advisory firms affect corporate governance?
- What is the role of ethics in corporate governance?
- What are the major causes of corporate governance issues?
- What are the access to information issues?
- What are decision-making structure issues?
- What are the power struggle or competition issues?
- Holding Company
- What are hostile takeovers and defenses to hostile takeovers?
- Williams Act
- Staggered Board
- Delay-Tactic Defenses?
- Legal Lockup Defenses?
- White Knight and Pac Man Defenses?
- Jonestown Defense
- Lady Macbeth Strategy
- Macaroni Defense
- Yellow Knight
- Back-end Plan Definition
- Backflip Takeover Definition
- Dead Hand Provision Definition
- Kamikaze Defense
- Operating Company Property Company Model
- Scorched Earth Policy Definition
- Revlon Rule
- What are benefit-alignment issues?
- Cadbury Rules Definition