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smu mba assignments answer MB0045 - FINANCIAL MANAGEMENT Q1. TCS has emerged as India's most admired company ahead of Hindustan Unilever, ITC, and Infosys, says global management consultancy Hay Group. TCS replaced last year's winner group company Tata Steel by scoring highest on parameters such as corporate governance, financial soundness, and talent management. Two criteria in particular, Leadership, and Creating Shareholder Value separated the winners. How do you think effective interaction between HR and finance department of a firm helps in achieving its skills? Do you think that TCS has preferred the profit maximization approach over the wealth maximization approach?

Finance and HR
Human Resources and Finance are two very different departments; each bringing a unique, yet equally valuable, view of the organization. Unfortunately, collaboration between Human Resources and Finance is not the norm. In many cases, the working relationship between Human Resources and Finance is neutral at best and that is unfortunate for Human Resources, Finance and the organization.

The relationship between Human Resources and Finance is a vital business relationship and one well worth the effort. Financial management is also related to human resource department as it provides manpower to all the functional areas of the management. Financial manager should carefully evaluate the requirement of manpower to each department and then allocate the required
finance to the human resource department as wages, salary, remuneration, commission, bonus, pension, and other monetary benefits to the human resource department. Attracting and retaining the best manpower in the industry cannot be done unless they are paid salary at competitive rates. If an organization formulates and implements a policy for attracting competent manpower, it has to pay the most competitive salary packages to them. However, by attracting competent manpower, capital and productivity of an organization.
Wealth maximization vs. profit maximization
1)    From the point of evaluation of performance of listed firms, the most remarkable measure is that of performance of the company in the share market. Therefore, shareholder’s wealth maximization could be considered as a superior goal compared to profit maximization.

2)    Wealth maximization is based on cash flow. It is not based on the accounting profit as in the case of profit maximization.

3)    Through the process of discounting, wealth maximization takes care of the quality of cash flow. Converting uncertain distant cash flow into comparable values at base period facilitates better comparison of projects.

4)    Corporates play a key role in today’s competitive business scenario. In an organization, shareholders typically own the company, but the management of the company rests with the board of directors.

5)    When a firm follows wealth maximization goal, it achieves maximization of market value of share. A firm can practice wealth maximization goal only when it produces quality goods at low cost. Maximization of wealth demands on the part of corporates to develop new products or render new services in the most effective and efficient manner.

Another notable feature of the firms that are committed to the maximization of wealth is that, to achieve this goal they are forced to render efficient service to their customers with courtesy.

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