In the previous blog post, we discussed some of the objectives of financial management. Profit maximization is only a small part of what an outsourced cfo needs to do for a company.
The reason people go into business is to make money. In order to make money you need to employ a facet of business financial management that is commonly referred to as wealth maximization. This is also known as maximizing value.
The value of a business is based on the market price of that particular company’s common stock. This market price and the value of the business takes into account the present and possible future earnings for each share. The chief financial officer, outsourced or otherwise, is responsible for making decisions that will maximize the amount of value or wealth that a certain company has. This is a huge responsibility and one that shouldn’t be taken lightly.
This requires knowledge of economic outlook, outlook of a the particular company, technical factors, and even mass psychology. So the chief financial officer is responsible for having very extended knowledge in many different areas. This is why it usually takes a cfo many years of experience and many years of study to be able to do their job well.