Textbook Notes (363,566)
Canada (158,433)
RSM100Y1 (431)
Chapter 20

CHAPTER 20-Financial Decisions and Risk Management

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University of Toronto St. George
Rotman Commerce
Michael Szlachta

CHAPTER20: FINANCIAL DECISIONSAND RISKMANAGEMENT Role of the financial manager - production manager must plan and control output of goods and services; marketing manager must plan and control development and marketing of products - financial managers plan and control the financial resources of a firm; it oversees the acquisition and spiral of the firms assets - Finance involves: determined a firms long term investments, obtaining funds to pay for the investments, conducting the firms everyday financial activities, helping to manage the risks that the firm takes Objectives of the financial manager - collect funds, pay debts, establish trade credit, obtain loans, control cash balances and plan for future financial needs. Overall goal is to increase a 1L728 value, and thus the stockholders wealth - make decisions for improving financial status of a firm - Must ensure that firms earnings exceed costs to earn a profit - Sole proprietorships and partnerships, profit => owners wealth;corporation, profit => increase in value of common stock Responsibilities of the financial manager - 3 categories: 1) Cashflow management - FM must ensure that a firm has enoughfunds on hand to purchase materials and the HR that it needsto produce goods and services - involves overseeing how cash flows into the firm in the form of revenues and to in the form of debt payments 2)financial control - FM must be prepared to make adjustments for actualfinancial changes that occur each day. - financial control is the process of checking actualperformance against plans to ensure that the desired financial status is achieved - Must monitor revenue inflows and make appropriate adjustments - Budgets are crucial, provides a means to how performance is measured 3) Financial planning - must have a financial plan - a description of how a business willreacha financial positionthat it seeks for the future. Must address the amount of funds that the company needsto meet immediate plans, when it willneed more funds, whereit can get the funds to meet short term and long term needs - FM must be ableto understand why firm needsfunds - Must assess relative costs and benefits of potential funding sources Why do businesses need funds? 2 types of financial outlays: www.notesolution.com
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