Textbook Notes (368,418)
Canada (161,876)
MGTA02H3 (363)
Chapter 20

Management II Chapter 20

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Management (MGT)
Chris Bovaird

Management Chapter 20 Financial Decisions and Risk ManagementThe Role of the Financial ManagerFinancial managers those managers responsible for planning and overseeing the financial resources of a firmFinance the business function involving decisions about a firms longterm investments and obtaining the funds to pay for those investmentsoFour responsibilities determining longterm investments obtaining funds conducting firms everyday financial activities help manage risksObjectives of the Financial ManagerTo increase firms value and stockholders wealth by making decisions to improve status in corporations profitsincrease in value of common stockResponsibilities of Financial ManagerCash flow management managing the pattern in which cash flows into the firm in the form of revenues and out of the firm in the form of debt payments idle cash should be invested Financial control the process of checking actual performance against plans to ensure that the desired financial status is achieved sales are unpredictable so financial adjustments may need to be madebudgets provide measuring stick to evaluate performanceFinancial planning a description of how a business will reach some financial position it seeks for the future includes projections for sources and uses of fundsWhy Do Businesses Need FundsFailure to make contractually obliged payments can lead to bankruptcy ShortTerm Operating ExpendituresAccounts payable unpaid bills owed to suppliers plus wages and taxes due within the upcoming yearAccounts receivable funds due from customers who have bought on credit oCredit policy rules governing a firms extension of credit to customers way of predicting payment schedulescredit usually allowed to customers who have ability to pay vice versa oEx 210 net 30 means that customers have 2 discount if they pay within 10 days must pay full price within 30 daysInventory materials and goods currently held by the company that will be sold within the year too much means money cant be spent elsewhere too little means potential sales are lostoRaw materials inventory that portion of a firms inventory consisting of basic supplies used to manufacture products for sale ex Levi Straus has rolls of denimoWorkinprocess inventory that portion of a firms inventory consisting of goods partway through the production process ex Cut out but not sewn jeansoFinished goods inventory that portion of a firms inventory consisting of completed goods ready for sale completed jeansWorking capital difference between a firms current assets and current liabilities liquid assetoWorking capitalinventoriesaccounts receivableaccounts payableoUsually is 20 of sales working capital is not useful cash flow less working capital raises earnings permanentlyless WC saves moneyLong Term Capital Expenditures
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