Session long project

FINANCIAL MANAGEMENT

STUDENT NAME : SETU SHARMA ROLL NUMBER: SMBA 12030

INDEX

WHAT IS A CFO?
CFO the abbreviation stands for Chief Financial officer. The CFO is a person who performs varied functions but most importantly he is the person who is responsible for looking after all the financial activities in an organisation. Primarily the work of CFO can be divided into three broad segments which can be as follows. Controllership duties Treasury duties Economic strategy making Controllership Duties: In controllership duties the CFO is responsible for presenting and reporting the data pertaining to the total historical financials of the company. The data has to be accurate as all the stockholders, analysts, creditors and employees are dependent on the facts and figures given by the CFO. Treasury Duties: Treasury duties of the CFO contain the decision making capability as he is the one looking after present financials of the company. He has to take these decisions taking into consideration the liquidity and the risk factor. He is also responsible for overseeing the capital structure of the company which includes the best mix of debt, equity and internal financing. Economic strategy: CFO is the main person who has to decide the economic strategy of the organisation, he should know and report which are the best and worst areas of the company and where more capitalisation is required, he should foresee into the further implications of financials decisions and how can it affect the organisation.

HOW DOES MARKET EVALUATE THE PERFORMANCE OF A COMPANY?

In todays world the per share value has become almost meaningless as it is considered to just convey only the comparative value to the shares of the other organisation. For an investor today, he needs more concrete resource to evaluate a company rather than shares as the value of the share keeps on changing. We arent concerned with the per share value as it always keeps on changing but also the different companies have different number of the outstanding shares . So to know about the total market capitalisation the company we need to know the total outstanding shares and then we multiply it by the value of per share to get the total value of the organisation. For example: Stock price: $60 Outstanding shares: 30 million Market cap: $60 x 30,000,000 = $1.8 billion

What does the market cap tell us?

It helps customers in evaluating the companies .By general rule we can divide the companies as Small cap: under $ 1 billion Midcap: $1-10 billion Large cap: greater than $10 billion So to understand the evaluation of a particular company, market capitalisation is very important and most of the people in todays world use this as major method of companys evaluation.

FROM THE CFO TO CEO

In todays world, majorly in the North America and the Western Europe almost 15-20% of the CFOs tend to become future CEOs of the companies. This percentage is greater than any other number or percentage of CEOs from particular department. Today, it has become even more important for the organisations to the CFOs as the future CEOs of the company as after 2008 crunch of global economic market the focus of the whole world has shifted; top line growth has disappeared with credit crunch and robust financial leadership. The major priorities today are:

Overhead reduction Cost management Cash flow management Increased productivity So because of the shift in todays economies it has become more apparent to have the CFOs as the CEOs.

FINANCE DEPARTMENTS AS THE BEST PLACE TO TRAIN THE CEOs

It can be easily justified that the financial departments are the best place to train the future CEOs as the financial institutions develop the right skills required to develop the future CEOs as it develops the major qualities required in the CEO. The financial department help a person to analyse goals and the risks involved with it. The financial department helps in making a person commercial savvy. Financial department is the only department which is contact with all the other departments so it helps in knowing the other functions of the organisation as well. It helps in having an eye on the costs control and the working capital policies. It helps in making strong analytical skills for reviewing the information flows of the different businesses and different jobs. It helps in increasing knowledge of how to build business because of the acquisitions and mergers, so it develops a lot of knowledge on how to expand business.

PROS AND CONS OF THE CFO AS A CEO

PROS OF CFO AS CEO
1.They have outstanding financial skills and risk evaluation policies.

CONS OF CFO AS CEO

1. The CFOs are generally considered to have stereotypes of not going outside and interacting much which leaves a space between the shareholders and the CEO.

2. They can align easily in taking key business 2. CFOs generally are low in communication decisions because of strong analytical skills. and the PR skills. 3.They are the right person concerning the problems of the cost control, cash management and financial restructuring 3. CFOs generally are considered the people who dont have much in depth knowledge about the products and marketing strategies.

4.They have the exact idea of the market 4.CFOs dont have generally interaction with capitalisation and can implement the policies shareholders and the customers so it needs easily accordingly to be improved upon. 5. They have close interactions with every other department, that why they are well acquainted with knowledge of others. 6.They have strong strategic skills and are best persons to work when there is financial crisis and emphasis is on performing duties in a prescribed budget 5.Lack of creative approach

The list of the CFOs who have gone on to become CEOs of Big Companies
Indra Nooyi, CEO, PepsiCo. Praveen Kadle, Managing Director, Tata Capital Vishakha Mulye, Managing Director & CEO, ICICI Venture Funds Management Christine Hodgson, CEO of Capgemini Jennifer Price, CEO of Archer Matheison

Assignment 2
Sprint- Nextel Sprint Nextel is one of the biggest telecom vendors in the world and the largest telecom company in North America. It is a publically traded company and is listed in NYSE. The price of the share has primarily ranged from $ 6 to $ 8 in last 2 months.

Company Softbank corps Capital research Dodge and cox vanguard Paulson and company Steel state Newton management Templeton Fidelity Management Omega Advisors

Shares 590,476,150 330,058,060 319,807,612 159,452,122 129,672,330 126,121,858 95,202,474 78,852,500 74,954,502 56,018,320

Percentage 19.65 10.67 10.62 5.33 4.24 4.20 3.16 2.62 2.49 1.86

Net income was 1876.2 million USD

Revenue was 14,185 million USD Earnings per share was 0.63 Dividends per share was 0.50 Working capital was 2019 million USD Return of assets was 8.32% Return on equity was 14.3% The prices of the shares were increasing steadily so that means that they were growing well HPR Current price = $ 7.8 Old price = $ 6.9 HPR = income per share + (C.P- O.P)/O.P = 0.63 + (0.9/6.9) =0.76 =7.6% As the HPR of the sprint is good when we compare it to the growth of the American economy, we can surely say that is worth to invest in the Sprint- Nextel Danielle Hease is the CEO of the Sprint-Nextel, he is MBA from MIT- Sloan and is considered a pioneer in the field of telecom. He was former CEO of telecom giant AT&T and has helped the companies to grow at a steady rate. He is the person who increased the revenues of sprint by launching 4G in North America.