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AFM131 Study Guide - Final Guide: Cash Flow, Retained Earnings, AccountingPremium

2 pages107 viewsFall 2018

Accounting & Financial Management
Course Code
David H A
Study Guide

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Chapter 17, module 9
Steps in financial planning:
o Forecasting a firm’s short term and long-term financial
needs: cash flow forecasts for short term eg
o Developing budgets: capital, cash and operating master
o Establishing financial control: comparing actual with budgets
Roles of CFO:
o Steward
o Operator
o Catalyst- add value
o Strategist
Why we need funds?
o Manage day to day needs
o Control credit operations
o Acquire needed inventory
o Make capital expenditures
4 C’s
o Character: business size, location, #of employees
o Capacity: ability to pay its bills. Eg: cash flow
o Capital: if they’ve financial resources to repay creditors
o Conditions: external factors (industry growth, political etc)
o Adv of shares:
Never have to repaid
Don’t HAVE to pay dividends, thus can reinvest
retained earnings
Creates no debt
o Disadv:
Have right to vote so dilution of control
Dividends paid from profit after tax so not tax
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