Role of the Finance Function for a Management

Question: How the finance function can support management? Answer: Role of the Finance Function for a Management. Finance always plays a very important role in the management of the company due to its varied functions in every field of management of an enterprise. One of the important functions that is being provided by the Working Capital Management. The working capital is a concept that is many more times than what its name suggests. The working capital cycle of a company determines how well the managers are being solving the cycle of conversion throughout the operating cycle of the company. The working capital which shows the difference of current assets and liabilities is utmost the basic fact that what is the funding and finance position in the business. The working capital of a company in UK can be presented as under: Calculation of the Working Capital Of British American Tobacco For 2013 Working Capital represents the difference of Current Assets and the Current Liabilities For a company The Current Assets Of British American Tobacco consists of Items Amount (million pounds) Inventories 4,042.00 Income tax receivable 95.00 Trade and other receivables 2,876.00 Available-for-sale investments 54.00 Derivative financial instruments 312.00 Cash and cash equivalents 2,106.00 Total 9,485.00 The Current Liabilities Of British American Tobacco consists of Items Amount (million pounds) Borrowings 1,980.00 Income tax payable 487.00 Other provisions for liabilities and charges 194.00 Trade and other payables 5,741.00 Derivative financial instruments 34.00 Total 8,436.00 CURRENT ASSETS 9,485.00 CURRENT LIABILITIES 8,436.00 WORKING CAPITAL 1,049.00 The finance function playa a very important role in the life style of the company as it helps the management to manage the resources in a financially sound manner. The working capital of the company is positive which presents an idea of the fund blocked in the circulation working capital cycle. The management of working capital increases the profitability of the concern and the liquidity problems relating to the business are solved. It ensures that the short term obligations of the company are taken care of. Investor are also ready to invest in a company with good current ratio i.e. the current assets are greater than the liabilities. The issue of fund management generally occurs due to the reasons such as non financing functions being used to manage the operations of the business cycle which in turns hampers the situation of the corporate around the world. If a company is able to manage the working capital then there will be no issues relating to the shortage of short term funds in any situation. So, it can be said that the working capital management leads to increase in the profitability and the liquidity in the organization. Thus working capital management helps in wealth maximization of the shareholders.(SBA) The concept of working capital and the cash conversion cycle in the case of British American $ Tobacco company can be understood using the finance function which can help them to understand the role of the people in the financing structure of an organization. References Vahid, T. K. (2012, October). Sciencedirect. Retrieved from https://www.sciencedirect.com/science/article/pii/S187704281203666X ICAEW. (n.d.). Retrieved from https://www.icaew.com/en/technical/business-and-financial-management/business-support-functions catalogue.pearsoned.co.uk. (n.d.). Retrieved from https://catalogue.pearsoned.co.uk/assets/hip/gb/hip_gb_pearsonhighered/samplechapter/Watsonch3.pdf Valcon. (n.d.). Retrieved from https://www.valcon.in/en-GB/Services/CFO-services/The-CFO's-contribution-to-the-bottom-line.aspx Valcon. (n.d.). Retrieved from https://www.valcon.in/en-GB/Services/CFO-services/Strategic-development-of-the-financial-function.aspx