notecard - FINANCE is the function in a business that...

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Click to edit Master subtitle style 5/7/09 FINANCE is the function in a business that acquires funds for the firm and manages those funds within the firm. FINANCIAL MANAGEMENT is the job of managing a firm’s resources so it can meet its goals and objectives. The role of an ACCOUNTANT is like that of a skilled technician who takes measures of a company’s health and writes a report. FINANCIAL MANAGERS are managers who make recommendations to top executives regarding strategies for improving the financial strength of a firm. Most organizations designate a manager in charge of financial operations, generally the CHIEF FINANCIAL OFFICER (CFO.) In large and medium-sized companies, the CFO is responsible for both accounting and finance functions. Financial management could also be assigned to the company TREASURER or vice president of finance. A COMPTROLLER is the chief accounting officer. Two key responsibilities of the financial manager are to obtain funds and to control the use of those funds. The most common ways for firms to FAIL FINANCIALLY are: UNDERCAPITALIZATION , or not enough funds to start with, Poor CASH FLOW , or cash in minus cash out INADEQUATE EXPENSE CONTROL.// WHAT IS FINANCIAL MANAGEMENT? Financial managers are responsible for: Buying merchandise on credit (accounts payable), Collecting payment from customers (accounts receivable), Making sure the company doesn’t lose too much money on bad debts. These functions are especially critical to small and medium-sized companies. Financial managers also handle TAX MANAGEMENT . As tax laws change, finance specialists must carefully analyze the tax implications of various decisions.// FINANCIAL PLANNING Financial planning is a key responsibility of the financial manager. 1 It involves analyzing short-term and long-term money flows to and from the firm. 2 The overall objective of financial planning is to optimize profits and make the best use of money. 3. steps in FINANCIAL PLANNING : a. FORECASTING both long-term and short-term financial needs b. DEVELOPING BUDGETS to meet those needs c. ESTABLISHING FINANCIAL CONTROL to see how well the company is following the financial plans. // FORECASTING FINANCIAL NEEDS 1. A SHORT-TERM FORECAST is a forecast that predicts revenues, costs, and expenses for a period of one year or less. 2. A
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