Factors Affecting Financial Management

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The routine in financial management activities may be cumbersome for some corporate leaders, but these work streams help companies run efficient businesses. Functions such as record keeping, financial reporting and fundraising help a firm ease its route to financial success. Factors affecting financial management include government regulations, the state of the economy, securities exchanges and borrowing costs.

Financial Regulations

Company principals establish a working rapport with regulators to create a compliant, effective business environment. Senior executives understand that adverse legislation can cripple productivity, a prelude to financial losses later on down the road. Consequently, top leadership sets up corporate compliance departments to monitor regulatory developments and indicate how they may affect financial activities. For example, new Occupational Safety and Health Administration rules concerning workplace safety could increase personnel charges in corporate income statements. Aside from compliance managers, internal auditors help companies find ways to handle the binomial question of generating profits while complying with the law.

Corporate Solvency

Solvency is a broad term referring to a borrower's ability to repay a loan and steps the creditor takes to maintain a strong balance sheet. Investors pay attention to solvency metrics to determine whether a firm is a good bet or an unfortunate wager. Corporate-solvency discussions are hardly a sideshow for financial management professionals. They contribute their intellectual knowledge to these talks, helping corporate leadership find ways to operate without piling on too much debt. Financial managers also work in tandem with fixed-asset accountants to increase corporate assets, such as equipment, land and machinery.

Securities Markets

Securities markets and businesses enjoy a mutually beneficial relationship. Healthy conditions in financial exchanges positively affect corporate financial strategies. Well-run, profitable firms move market trends favorably, as investors view corporate profits as a sign the economy is on an upward trajectory. Financial exchanges, such as the Tokyo Stock Exchange, Chicago Mercantile Exchange and New York Stock Exchange, enable publicly traded companies to implement their financial strategies, most notably by raising cash and purchasing long-term investments.

Business Lending

Business lending, or corporate credit, is a vibrant factor in the financial management equation. It gives organizations the opportunity to operate in the short term and think confidently about long-term expansion tactics. All organizations, including charities, borrow to rein in the occasional cash shortfall resulting from delays in customer payments or donor remittances. Finding the right mix of debt and equity is part of a company's formula for success. Failure to adequately think about what debt level is appropriate for the firm may cause corporate income to drop. Corporate credit refers to financial instruments such as loans, overdrafts arrangements, credit lines and bonds.

References

About the Author

Marquis Codjia is a New York-based freelance writer, investor and banker. He has authored articles since 2000, covering topics such as politics, technology and business. A certified public accountant and certified financial manager, Codjia received a Master of Business Administration from Rutgers University, majoring in investment analysis and financial management.

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