Chapter 10 – Financial Decisions:
Financial managers – those managers responsible for planning and overseeing the
financial resources at a firm.
Finance (corporate finance) – the business functions involving decisions about a
firm’s long-term investments and obtaining the funds to pay for those investments.
With responsibilities (1) determining a firm’s long term investment (2) obtaining
funds to pay for those investments (3) conducting the firm’s everyday financial
activities (4) helping to manage the risk the firm takes
Objective of financial manager:
Collect funds, pay debts, establish trade credit, and obtain loans, control cash
balance, and plan for future financial needs.
Increase firm’s value – thus stock holder’s wealth.
Ensure that a company’s earning exceed its cost – profit.
Responsibilities of the financial manager:
Must ensure that it always has enough funds on hand to purchase materials and
human resources it needs to produce goods and services.
Funds that are not need immediately should be invested to earn more money for the
Cash flow management – managing the pattern in which cash flows into the firm
in the form of revenue and out of the firm in the form of debt payments.
Financial control: the process of checking actual performance against plans to
ensure that the desired financial status is achieved.
Budget provides the “measuring stick” against which performance is evaluated.
Financial planning – a description of how a business will reach some financial
position it seeks for the future; includes projections for sources and uses of funds.
Q asked: amount of funds does the company need to meet immediate plans? When
will need more funds? Where can I meet both short/long-term needs?
Must also assess the relative costs and benefits of potential funding sources.