CFOs, Explained

Q Can you explain what a company’s chief financial officer does? N.S., Gainesville, Florida

—A A chief financial officer (CFO) — such as General Motors’ Dhivya Suryadevara, Microsoft’s Amy Hood or JPMorgan Chase’s Jennifer A. Piepszak — oversees all financial matters, determining the company’s current and future financial needs and how to most effectively finance them.

The CFO sets and maintains the “capital structure” — the company’s mix of debt financing and stock financing. Other duties include overseeing the forecasting and budgeting process, managing relationships with funding sources such as banks, maintaining the company’s books and records, and preparing and communicating the quarterly and annual financial statements.

Q How is inflation measured? — P.B., Pleasanton, California

A The Consumer Price Index (CPI) is the most common measure of inflation (though there are others). It’s used as an economic indicator and to adjust dollar values in various figures, among other things.

According to the Bureau of Labor Statistics (BLS), the CPI is “a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.” (By the way, “urban consumers” make up about 93% of the U.S. population.) The measured “basket” includes products such as butter, chicken, baby food, gasoline, bedding, underwear, tires, medicines, newspapers and beer, and services such as dental care, hospital care, haircuts, postage, concert tickets, dry cleaning and even funeral expenses. The index shows that if you bought such items 25 years ago (in 1994) for $100, in 2019 they would cost you around $173.

Some variations of the CPI exclude particularly volatile categories, such as food and energy. Learn more at BLS.gov/cpi. Want more information about stocks? Send us an email to foolnews@fool.com.