Professional Documents
Culture Documents
Financial
Management
McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Financial Management
LEARNING GOALS
1. Explain the role and responsibilities of financial
managers
3
WHAT IS FINANCE?
4
FINANCIAL MANAGEMENT
Financial Management --
The job of managing a firms
resources to meet its goals
and objectives.
18-5
THE ROLE OF FINANCE AND FINANCIAL MANAGERS
Working-capital management
Acquisitions/Merger impacts
Source: CFO Magazine, July/August 2010.
9
FINANCIAL PLANNING
10
FINANCIAL FORECASTING
Short-Term Forecast (Budget) -- Predicts revenues,
costs and expenses for a period of one year or less
12
3 TYPES of BUDGETS in Financial Plan
Capital Budget -- Highlights a firms spending plans
for major asset purchases that often require large sums
of money & have useful life > 1 year & benefit > than
specified $ amount (varies by firm). E.g.: PPEs
14
ESTABLISHING FINANCIAL CONTROL
18-15
FACTORS USED IN ASSESSING
FINANCIAL CONTROL
Quick Quiz
1. Financial managers use data prepared by accountants to
develop strategies for improving the financial performance of
the firm
a) True b) False
18
FUNDING SOURCES
19
SHORT and LONG-TERM FINANCING
Short-Term Financing --
Funds needed for a year or
less.
Long-Term Financing --
Funds needed for more than
a year. 5, 10 or even 20
years
18-20
TYPES of SHORT-TERM FINANCING
21
TYPES of SHORT-TERM FINANCING
22
DIFFERENT FORMS OF SHORT-TERM LOANS
Banks generally
prefer to lend short-
term money to larger,
more established
businesses.
24
FACTORING
Factoring -- The process of
selling accounts receivable
for cash. (e.g. collection
agency)
A factor is a market
intermediary (usually a
financial institution or a
commercial bank) that
agrees to buy the firms AR,
at a discount. Factors charge more
than banks, but many
Expensive source of short
small businesses dont
term funds
qualify for loans.
25
COMMERCIAL PAPER
31
USING DEBT FINANCING by ISSUING BONDS
Similar to an IOU agreement with a
promise to repay with interest on a
certain date
33
DIFFERENCES BETWEEN DEBT and EQUITY
FINANCING
Types of Financing
34
USING LEVERAGE for FUNDING NEEDS
35
LESSONS of the FINANCIAL CRISIS
Quick Quiz
1. The first step in financial planning is to develop a budget
to better control costs
a) True b) False
ASSESSMENT
What are the two major forms of long term debt
financing available to a firm?
Term loan agreement and Issuing Bonds
Class Activity
Go online and check the capitalization required to open a
franchise of your choice, like Subway, KFC or McDonalds.
Does the franchisor offer financial assistance to
prospective franchisees? Evaluate the cost of the
franchise versus its business potential in your
neighborhood.