Principles of Managerial Finance

CHAPTER 1 The Role and Environment of Managerial Finance 7

president or chief
executive officer (CEO)
Corporate official responsible for
managing the firm’s day-to-day
operations and carrying out the
policies established by the board
of directors.

FIGURE 1.1 Corporate Organization

The general organization of a corporation and the finance function (which is shown in yellow)

Financial

Planning and

Fund-Raising

Manager

Cash

Manager

Pension Fund

Manager

Capital

Expenditure

Manager

Credit

Manager

Foreign

Exchange

Manager

Corporate

Accounting

Manager

Financial

Accounting

Manager

Tax

Manager

Treasurer

Vice President

Manufacturing

Vice President

Human

Resources

Vice President

Finance

(CFO)

President

(CEO)

Board of Directors Owners

Managers

Stockholders

elect

hires

Vice President

Marketing

Vice President

Information

Resources

Controller

Cost

Accounting

Manager

frequently granted options to buy a specified number of shares of the firm’s stock

at a stated—and often attractive—price.

The presidentor chief executive officer (CEO)is responsible for managing

day-to-day operations and carrying out the policies established by the board. The

CEO is required to report periodically to the firm’s directors.

It is important to note the division between owners and managers in a large

corporation, as shown by the dashed horizontal line in Figure 1.1. This separa-

tion and some of the issues surrounding it will be addressed in the discussion of

the agency issuelater in this chapter.