MGTA02H3 Chapter Notes - Chapter 10: Scenario Analysis, Income Statement, Capital Structure
Chapter 10 – Notes
Managing the Capital – Function of Finance
Financing the Enterprise
Financial Management: Planning, leading, organization and controlling the finding and use of
capital
When a business grows, it will hire dedicated employees to manage the finance function
Chief Financial Officer (CFO): The senior management responsible for overseeing financial
management of the entire organization
oSits on Board of Directors
oOne of the 2/3 most senior influential people of any organization
Finance owes its existence to the assumption that:
oPeople have ideas, but no money
oPeople have money, but don’t need it
Proposals need to be justified, estimates of the cost need to be made, project must be
evaluates, etc.
The role of Financial Manager:
oBudgeting (Estimating capital needs)
oInvestment appraisal (appraise various plans, projects, opportunities that are proposed)
oCapital raising (looking at balance sheets and financial forcast)
oInvestor relations
oFinancial control
Why Businesses Need Finance
A business must spend money to establish itself long before it is in a position to sell anything
Money is spent even before production – you have to spend money to make money
A business can raise capital after it breaks even of liabilities
CFO must ensure that they have raised enough owner’s equity at the onset before they start
borrowing
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MGTA02H3 Full Course Notes
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Document Summary
Financial management: planning, leading, organization and controlling the finding and use of capital. When a business grows, it will hire dedicated employees to manage the finance function. Chief financial officer (cfo): the senior management responsible for overseeing financial management of the entire organization: sits on board of directors, one of the 2/3 most senior influential people of any organization. Finance owes its existence to the assumption that: people have ideas, but no money, people have money, but don"t need it. Proposals need to be justified, estimates of the cost need to be made, project must be evaluates, etc. The role of financial manager: budgeting (estimating capital needs, investment appraisal (appraise various plans, projects, opportunities that are proposed, capital raising (looking at balance sheets and financial forcast, investor relations, financial control. A business must spend money to establish itself long before it is in a position to sell anything.
