Textbook Notes (280,000)
CA (160,000)
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MGT (800)
MGTA02H3 (400)
Chapter 10

MGTA02H3 Chapter Notes - Chapter 10: Cash Flow, Accounts Payable, Corporate Finance


Department
Management (MGT)
Course Code
MGTA02H3
Professor
Chris Bovaird
Chapter
10

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THE ROLE OF THE FINANCIAL MANAGER
-financial managers: managers responsible for planning and overseeing the financial resources
of a firm.
-finance (corporate finance): the business function involving decisions about a firm’s long-
term investments and obtaining the funds to pay for those investments
Objectives of the Financial Manager
-collect funds, pay debts, establish trade credit, obtain loans, control cash balances and plan for
future financial needs
-increase a firms value -> stock holders wealth
Responsibilities of the Financial Manager
-cash 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
-financial control: the process of checking actual performance against plans to ensure that the
desired financial status is achieved
-financial plan: 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?
-every company need $ to survive
Short-Term (Operating) Expenditures
-incurs regularly in everyday business activities
-fin. managers must know in advance the amount of accounts payable to be repaid and when
-fin. managers need to know how much accounts receivable are out and when will they receive
- credit policy: rules governing a firm’s extension of credit to customers
-inventory: materials and goods currently held by the company that will be sold w/in the year
-must be well managed (much or too few is bad)
-raw materials inventory: portion of a firm’s inventory consisting of basic supplies used to
manufacture products for sale
-work-in-process inventory: portion of a firm’s inventory consisting of goods partway through
the production process
-finished goods inventory: portion of a firm’s inventory consisting of completed goods ready
for sale
-reducing working capital (inventories, A/R-A/P) means saving $
Long-Term (Capital) Expenditures
-companies need $ to cover long-term expenditures for fixed assets
-they require more planning b/c they’re not normally sold, acquisition requires large investment,
represent a binding commitment of company funds.
SOURCES OF SHORT-TERM FUNDS
MGTA04 Chapter 10
1
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