Completion of Internships at Two Companies

The completion of internships at two companies that included Armada Mercantile and Achieve Life Science provided the opportunity to learn about different challenges that financial institutions face on a daily basis. The two companies can be described as a fast-growing information technology corporations that provide one with an array of opportunities regarding the different decisions that should be and issues that one encounters when working in financial institutions. Working at the institutions thus provided with new experiences regarding roles and responsibilities of financial managers and the investment options that one may undertake. 

Roles and Responsibilities 

Decisions Financial Managers Make 

Investment Decisions 

Financial managers have to make three critical decisions to ensure that they assist the business to have continued business operations. The three decisions include investment decisions, financing decision, and strategic decision. Investment decisions are also known as capital budgeting decision and are decisions where the company the company makes a huge investment regarding the acquisition of an asset. The firm has to select how to invest their funds by selecting the most appropriate asset and investment that should be used to maximize the profits for the financial institution. It is the role of the financial manager to analyze the cash flow of the asset which is to be acquired before making the decision to purchase the asset. 

The financial manager should also consider the return on investment that the new investment would provide. The return on investment enables the company to compare between different types of assets and evaluate the asset that should bring the biggest returns for the company. Every capital investment would come with the associated risks and it is the role of the financial manager to analyze all the financial risks that are associated with the purchase of the investment. After a complete analysis of the investment option, the financial manager is responsible for preparing a complete report that provides details about the asset which should be acquired. The report should at least provide details that analyze the cash flow, the return on investment, and the risks that are associated with the acquisition of the asset (Ferracuti & Stubben, 2019). After such an analysis, the financial manager should provide advice regarding whether the acquisition of the asset would be a good decision for the company or not. 

Financial Decisions 

The financial manager may be required to make several financial decisions that impact the daily running of the company. There are several decisions that can be undertaken by the company and they vary based on the business needs. Based on the internship, the business had to take a loan for an investment and it was the role of the financial manager to evaluate the possibility of having the loan and other factors that are associated with the loan such as the interest rates. There were other roles and responsibilities that also included the management of shareholder funds. When making any financial decision, the financial manager had to take into account several different actors such as the cash flow position of the company, the interest rates, the risks, the operating costs, the nature of the state capital market, and fixed operating costs of the company. 

Strategic Decision 

The other role that the financial manager has to make deals with the strategic financial decisions. The financial growth and success of the company is largely at the hands of the financial manager. The strategy that is adapted by the financial manager can be a long-term or short-term strategy and it depends on the needs of the company. When undertaking a long-term strategy, the company may set goals that align with the long-term growth and success of the company that should take place over a long period of time. The financial manager should thus set the goals by considering different factors such as the debt that the institution can have, the profits expected, revenues expected, and profit margins that are expected with some of the investments made by the company. The analysis of the different factors should be used to create a master budget that shows how the company’s financial statements are doing. The company should therefore have a clear master plan that shows the progress of the business. 

There are several financial considerations that the finance manager should undertake that affects the daily running of the company. The finance manager is responsible for the analysis of the cash flow in the company and cost containment. The analysis of cash flow would involve various responsibilities such as the payment of bills and receiving of actual money which the business makes. The cash flow analysis involves a careful analysis of the credit reserves that the company has and whether it can adequately repay the credit through the cash receivables. From the analysis of the cash flow, the manager should then determine whether further negotiations should be made with the financial provider. The other role of the financial manager involves a cost containment analysis. This involves analyzing the company’s financial spending and determining whether the spending levels are in line with the company’s goals and whether the company should cut down on some of its expenses. The expenses should be considered by a careful analysis of the company’s revenues so as to determine the profitability of the company. 

Ethical Issues a Financial Manager Could Face 

There could be several ethical issues that the financial manager could face and one must ensure that they maintain all the ethical processes. Failure to abide by some ethical standards can result in significant legal consequences and financial penalties for the company. Frauds and scams are quite popular in financial investments and this have had severe consequences for the people involved. One of the ethical issues that the financial manager could face deals with the handling of financial data. The financial manager could falsify some data such as a situation where falsifying data makes a company appear more profitable than it actually is and this invites investors into the company. The financial manager is ethically required to present accurate financial data. When faced with such an issue, the financial manager can decide to fake the company’s profits and assets so as to make them actually look better than it actually is (Bhasin, 2016). The financial manager should understand that this is dishonest and it shows that the company is not ready to take actual responsibility for some of their actions. Doing this makes a company gain an unfair advantage and this can be prosecuted by law. 

There can be errors that have been made with the presentation of the company’s assets and profits. In case the errors have been made to make the company actually look more profitable than it is, the financial manager is ethically and morally required to point out the errors and to change them accordingly. When faced with such a situation, the financial manager can take a step and discuss the issue with the top management. In case one thinks that the boundaries of the law have been crossed, then the discussion with the employer would be undertaken so as to determine whether law enforcement should be involved with the issue. In case the management chooses not to comply by the required financial standards, then the financial manager is obligated to report the issue to the law enforcement for a further analysis of the case. In such a case the financial manager would have the protection by the law as the law observes that one can report a distrustful action without necessarily fearing the loss of their job (Carey et al., 2018). The financial manager handles most of the financial issues of the organization. It is thus expected of them to act in an ethical and moral manner and to abide by all the legal standards. 

Federal Safeguards 

It was established that there are different federal safeguards that are put in place so as to reduce the abuse of financial reporting. One of the common safeguards that is in place is the Sarbanes-Oxley Act. The act was created in the year 2002 and it was used to protect investors by making sure financial reporting followed certain standards of reliability and accurateness in their reporting. The act held the corporate advisors and the individuals that influence the preparation of financial data of a company legally responsible and accountable for any misconduct such as falsification of financial documents (Herath & Walker, 2018). However, one of the negative aspects of the Sarbanes-Oxley Act was that its implementation created a time consuming process when creating financial reports. There are several issues that financial managers should consider and it also made it impossible for companies that were relatively small to enter the stock exchange successfully. Nevertheless, the Sarbanes Oxley-Act was extremely effective as it guarded investors and shareholders from any possible misdeeds that could be undertaken by financial managers. 

The Sarbanes-Oxley Act was implemented after the Enron Scandal. The scandal had involved a situation where financial managers had falsified Enron’s financial reports to show that the company was more profitable than it actually was. The financial managers that were involved in the situation faced several legal consequences as a result of their actions. The Securities and Exchange Commission (SEC) along with the Financial Accounting Standards Board (FASB) then adopted new regulations that would make it difficult for financial firms to easily manipulate financial statements for the benefit of the firm. The protection of whistleblowers is also another initiative that has been used to ensure that financial companies abide by the standards and regulations. The whistleblower needs to have information about the wrongdoings of a company and come out with the evidence that provides details of the misdeeds. The SEC can be informed about the actions of the company and will follow up on the issue closely. The safeguards that have been place have ensured that most companies abide by the required legal standards for financial reporting. 

Investment Options 

Going Public 

A company that chooses to go public has to make an initial offering and this allows for the public to make an investment in the company. In case the company makes a profit, investors in the company will be able to earn dividends from the company’s profits. A company goes public by making an initial public offering (IPO) and at this stage the shares of the company’s stocks are traded publicly. While going public can seem as a good strategy for a company, there are certain advantages and disadvantages that could come about when a company decides to do so. Going public means that the stocks of the company will be sold on the public exchange forum. This can be a source of funds for the company and it can result in the company making bigger investments and thus higher profits. Going public is thus a strategy that a company can undertake in order to raise money. A company that goes public has to present its financial information publicly to shareholders and this adds a level of authenticity about the company’s business operations. 

Going public may also come with several disadvantages for a company. The initial public offering (IPO) takes a lot of work for the company and it can hurt the profits of the company. Business owners may not make a profit for themselves in case the public is reluctant in the purchase of shares from the company. Going public could also mean that the initial business owners lose control of a business as an established board of directors could be in the running of the business. A company that also goes public would face an increasingly huge amount of scrutiny by the SEC since the managers should abide by the Sarbanes-Oxley Act (Chaplinsky, Hanley, & Moon, 2017). This could lead to scrutiny from company competitors. 

How U.S. Stock Differ 

The United States Stock market is primarily made up of two markets. The first is the New York Stock Exchange (NYSE) which is the larger market and functions through an auctioning system. The stocks here are usually auctioned and the highest bidder gets the company’s stocks. The stock market makes use of both an over the counter and a security exchange market and both trading at the floor and electronic trading. The National Association of Security Dealers and Automated Quotations (NASDAQ) is the second market. The NASDAQ has its trading locations taking place primarily electronically through the use of the internet. This is different from the NYSE where it has most of its stocks being traded mostly on the floor of exchange. However, the NYSE has more established stocks that have a huge turnover as compared to the NASDAQ stocks that are mainly from technology companies. From the analysis of the stock markets, the NASDAQ would be a better option than the NYSE. The NASDAQ is made of high-tech and technology oriented companies that are more growth-oriented and would thus result in better profits and high rates for an investor. 

Investment Products 

There are different types of investment products that are available and they include mutual funds, bonds, and stocks. Stocks are usually bought and sold through the securities exchange market such as the NYSE and NASDAQ and the value of one’s stocks are usually dependent on the performance of a company. In such an investment option, the investors usually earn dividends once the company makes a profit. The downside of having such an investment option is that the investor can lose their investments and it does not guarantee for regular payments especially when there are lower profits. 

Bonds are another investment option and are also referred to as fixed income securities. They are debt investments where it allows one to lend money to a company or to a government over a fixed interest rate over a specific amount of time. In the exchange of the lending money, the lender would receive an interest along with the principal amount. The downside to bonds is that they would yield only a small return. 

The other investment option is a mutual fund investment. Mutual funds occur when a company pools money from several investors and then invests the money to securities that include bonds, stocks and short-term debt. The Mutual Funds and Exchange Traded Funds (ETFs) include a combination of stocks and bonds that are usually managed professionally and thus saves time and energy. It involves handing out of one’s capital to someone that is well-informed. The downside to this is that investors are usually restricted with the use of their money as they can trade shares only within the mutual fund. 

In conclusion, the internship at the financial position provided insight regarding the work required by a finance manager and various investment options that one can undertake. It was identified that the finance manager undertakes several roles and responsibilities that include analysis of capital investments, financial decisions, and strategic decisions. There could be ethical issues that could arise and the finance manager should abide by the ethical standards. The Sarbanes-Oxley Act provides guidelines that ensure investors do not engage in financial fraud. There were various investment options that institutions could undertake and they were identified as stocks, bonds, and mutual funds. 

References  

Bhasin, M. L. (2016). Fraudulent Financial Reporting Practices: Case Study of Satyam Computer Limited.  The Journal of Economics, Marketing and Management ,  4 (3), 12-24. 

Carey, C., Hodges, J., & Webb, J. K. (2018). Changes in state legislation and the impacts on elder financial fraud and exploitation.  Journal of elder abuse & neglect ,  30 (4), 309-319. 

Chaplinsky, S., Hanley, K. W., & Moon, S. K. (2017). The JOBS Act and the costs of going public.  Journal of Accounting Research ,  55 (4), 795-836. 

Ferracuti, E., & Stubben, S. R. (2019). The role of financial reporting in resolving uncertainty about corporate investment opportunities.  Journal of Accounting and Economics ,  68 (2-3), 101248. 

Herath, S. K., & Walker, S. A. (2019). How effective is Sarbanes-Oxley in the accounting profession–Is it accomplishing its Original Objectives? The Business & Management Review ,  10 (2), 98-107.