What does a Chief Financial Officer (CFO) do?

By Investopedia Staff AAA
A:

I

f you asked any company's CFO this question, you would probably be in for a three-hour conversation. But the core duties can be summarized in just a few paragraphs. A CFO's job can be broken down into three major components:

1. Controllership duties - These make up the backward looking part of a CFO's job. Controllership duties hold the CFO responsible for presenting and reporting accurate and timely historical financial information of the company he or she works for. Every stakeholder in the company - including shareholders, analysts, creditors, employees and other members of management - relies on the accuracy and timeliness of this information. It is imperative that the information reported by the CFO is accurate, because many decisions are based on it.

2. Treasury duties – The CFO is also responsible for the company's present financial condition, so he or she must decide how to invest the company's money, taking into consideration risk and liquidity. In addition, the CFO oversees the capital structure of the company, determining the best mix of debt, equity and internal financing. Addressing the issues surrounding capital structure is one of the most important duties of a CFO.

3. Economic strategy and forecasting - Not only is a CFO responsible for a company's past and present financial situation, he or she is also an integral part of a company's financial future. A CFO must be able to identify and report what areas of a company are most efficient and how the company can capitalize on this information. For example, the CFO of an auto manufacturer must be able to pinpoint which models are making the most money for the company and how this information can best be used to improve the company in the future. This aspect of a CFO's duties also includes economic forecasting and modeling - in other words, trying to predict (given multiple scenarios) the best way to ensure the company's success in the future.

The CFO's job is a very complex one. We have only scratched the surface of the many things this executive is responsible for. One thing is certain: a great CFO will usually differ from a good CFO by the way that he or she is able to project the long-term financial picture of the company and by how the company thrives based on his or her analyses.

(To learn more, check out The Basics Of Corporate Structure and Evaluating A Company's Management.)

RELATED FAQS

  1. Can I still set up an SEP if one of my employees refuses to participate?

    You can establish the SEP IRA, even if the employee refuses to participant. However, you would need to establish an IRA for ...
  2. I get multiple mailings to my house from companies that my spouse, children and I ...

    It's not uncommon for there to be more than one investment account holder in one household. If multiple members of your household ...
  3. I have a small business, and I'm considering setting up an SEP IRA. What are leased ...

    Generally, a leased employee is the employee of an outside organization from which you lease the employee's services. For ...
  4. If a company undergoes an acquisition can an employee withdraw 401(k) funds tax free?

    Although the participant may be eligible to withdraw the funds if a plan is terminated as a result of an acquisition or other ...
RELATED TERMS
  1. Protected Cell Company (PCC)

    A corporate structure in which a single legal entity is comprised ...
  2. Registered Holder

    Shareholders who hold their shares directly with a company.
  3. Duty Of Loyalty

    A director's responsibility to act at all times in the best interests ...
  4. Duty Of Care

    One of two primary fiduciary duties of directors, the duty of ...
  5. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  6. Adverse Domination

    A legal doctrine that allows regulators to bring litigation against ...
Related Articles
  1. Investing Basics

    Using Appreciative Inquiry To Solve ...

  2. Investing Basics

    The Basics Of Value Chain Analysis

  3. Investing Basics

    Top Tools for ERP Enterprise Resource ...

  4. Investing Basics

    Analysis of Companies with high goodwill

  5. Investing News

    Starbucks As An Example Of The Value ...

Trading Center