AFM131 Chapter 17: Chapter 17 - Financial Management
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AFM131 Full Course Notes
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The value of understanding finance: most common reasons firm fails financially, undercapitalization, poor control over cash flow. Inadequate expense control: understanding finance is important to anyone who wants to start a small business, invest in stocks or plan a retirement fund. Internal auditor (part of firm"s finance department) checks journals, ledgers and financial statements to make sure all transactions are in accordance with ifrs. Internal auditors must be objective and critical of any improprieties and deficiencies noted in their evaluations: without these audits, financial statements would be less reliable. Financial planning: financial planning analyzing short term and long-term money flows to and from a firm. Establishing financial controls: financial control: process in which a firm periodically compares its actual revenues, costs and expenses with its budget, most companies hold at least monthly financial reviews as a way to ensure financial control.