13.4 The Role of the Financial Manager
Finance. All the activities involved in planning for, obtaining, and managing a
Financial manager. Determines the following:
. How and where will the funds come from?
. How and when will the borrowed money be repaid?
. Decides what the company should do its fun/what investments should
be made in plant and equipment
. How much should be spent on R&D
. How excess funds should be invested
Financing a New Company: New businesses usually need to borrow money in order to
start off for this good financial management is very important.
Financial plan—a document that performs two functions:
1. Calculating the amount of funds that a company needs for a specified period
2. Detailing a strategy for getting those funds
Getting the money: New businesses are generally financed with some
combinations of owner’s personal assets, loans from families and friends and bank
loads. New businesses need a lot of cash for start up costs and initial operational
Maturity: period for which a bank load is issued
Shortterm loan: for less than a year
Intermediate loan: for one to 5 years
Longterm loan: for 5 years or more
Lines of credit: Allows you to borrow up to a specific amount as the need arises
Match your loans term with its purpose and consider the ability of your business to repay
it. Amortization: schedule by which you’ll reduce the balance of your debt e.g. periodic
payments or entire amount
Security: form of collateral, such as company or personal assets. If the borrower fails to
pay the loan when it’s due, the bank can take possession of these assets.
Interest: cost of using someone else’s money, The rate of interest charge