It is advantageous to promote Chief Financial Officers to the position of CEO because they are well informed in a wide range of management functions. Thus they are capable of overseeing all organizational functions effectively and successfully. They also have a wide range of knowledge, which includes the abilities to hire personnel, approve loans, and establish a rapport with the community to attract business and the expertise to assist customers with account problems.
We will write a custom Essay on Promoting Financial Officers to CEO specifically for you
301 certified writers online
Again they understand how to get an idea off the drawing board and into the production line with support from the employees and if applicable the board. They are also capable of critically looking into business performance and the management’s strengths and weaknesses.
However, there are high possibilities that financial officers may be short of leadership communication skills necessary for the position of CEO. Besides, their position does not give them the chance to demonstrate leadership skills required of an effective CEO (Financial Managers, 2007).
Accuracy of the Present Net Value of A Company’s Proposed Project
In a proposed project, the returns of an investment are purely expressed in dollars. It is worth noting that the distinction amid an initial investment and the cash flow of a given project in most cases produce accounts “for the time value of money” (Fabozzi, 2007; 121). Another advantage of using net present value in choosing the projects to pursue usually factors in cash flow after the project is matured and has raised initial capital invested in the project.
In most cases the data used to justify assessment of net present value is usually provided by the marketing or finance sections. The values arrived at help the relevant authorities to make an informed guess of the amount required to analyze, develop, a design as well as test usability of the proposed project.
With these, an organization is capable of estimating the percentage saving per year if the product is designed and its usability tested properly (Turner, 2011). It is however important to note that the accuracy of NPV should be able to answer two of Rosenberg’s criticism about usability ROI metrics. A pharmaceutical company introducing a new drug to the market can give rise to a more accurate NPV calculation.
How CFOs Make Capital Structure and Budgeting Decisions
They use the NPV (net present value) or the IRR (internal rate of return) financial techniques in the budgeting decisions. But recent studies indicate that the IRR method is troublesome because it leads to decisions that are not in the best interest of the investors in certain circumstances (Financial Managers, 2007).
On the other hand the NPV method steers the CFOs towards the project that maximizes wealth. In the making of a capital structure and the budgeting decisions, the CFOs must know the cost of capital in making capital budgeting decisions, helping to establish the optimal capital structure, making decisions such as leasing, bond refunding and working capital management (Fabozzi, 2007).
Why Small ‘Dot-Com’ Companies Choose Convertible Debts to Raise Finances
Considering research carried out by Ziegler (2010), the two main reasons why entrepreneurs are enthusiastic about convertible debts is because they perceive it as an easier way to access finances and that it delays pricing the round. However, convertible debt formation is simply some of the workings of the financial managers in financial institutions to come up with strategies to attract interest-bearing programs. To the upcoming entrepreneurs, however, this program is not very helpful because in the long run, it does not take any less time to create capital neither is it less expensive as they may perceive (Ziegler, 2010).
Fabozzi, F. (2007). The Complete CFO Handbook: From Accounting to Accountablity. New York: John Willy & Sons.
Financial Managers. (2007). Introduction.
Turner, W. (2011). A Strategic Approach to Metrics for User Experience Designers. Journal of Usability Studies, 52-59.
Ziegler, C. (2010). Raising Financing: Convertible Debt vs. Equity.