Textbook Notes (368,317)
Canada (161,798)
MGTA02H3 (363)
Chapter 12

Chapter 12

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Management (MGT)
Chris Bovaird

Chapter 12 Financial Decisions THE ROLE OF THE FINANCIAL MANAGER Financial managers are those managers responsible for planning and overseeing the financial resources of a firm. The business activity known as finance (or corporate finance) typically involves four responsibilities: o Determining a firms long-term investments o Obtaining funds to pay for those investments o Conducting the firms everyday financial activities o Helping to manage the risks that the firm takes Objectives of the Financial Manager Financial managers collect funds, pay debts, establish trade credit, obtain loans, control cash balances, and plan for future financial needs. A financial managers overall objective is to increase a firms valueand thus stockholders wealth. Financial managers must ensure that a companys earnings exceed its costs (earns a profit). Responsibilities of the Financial Manager Cash Flow Management Cash flow management is 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. More and more companies are learning to put their idle funds to work. By locating idle cash and putting it to work, firms not only gain additional income, but also can avoid having to borrow from outside sources. www.notesolution.comFinancial Control Financial control is the process of checking actual performance against plans to ensure that the desired financial status is achieved. Control involves monitoring revenue inflows and making appropriate financial adjustments. The budget provides the measuring stick against which performance is evaluated. Financial Planning Financial planning is a description of how a business will reach some financial position it seeks for the future; includes projections for sources and uses of funds. WHY DO BUSINESSES NEED FUNDS? Short-Term (Operating) Expenditures A firm incurs short-term expenditures regularly in its everyday business activities. Accounts Payable Accounts payable are unpaid bills owed to suppliers plus wages and taxes due within the upcoming year. Accounts Receivable Accounts receivable consist of funds due from customers who have bought on credit. Credit Policies Credit policy is rules governing a firms extension of credit to customers. This policy sets standards as to which buyers are eligible for what type of credit. Inventories Inventories are materials and goods currently held by the company that will be sold within the year. There are three basic types of inventories: o Raw materials inventory is that proportion of a firms inventory consisting of www.notesolution.com
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