Chapter 19 Outline

Chapter 19 Outline - that often require large sums of money...

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Chapter 19 Outline Finance is the function in business that acquires funds for the firm and manages those funds within the firm. Financial Managers plan, audit, budget, manage taxes, obtain funds, control funds, collect funds and advise top managers in ways to improve the firm. 3 Most Common Ways a Firm Fails Financially: 1. Undercapitalization (lacking on funds on how to start the firm) 2. Poor Control Over Cash Flow 3. Inadequate expense control Financial Planning Involves: 1. Forecasting both short-term and long-term financial needs a. Short-term - predicts revenue, costs, and expenses for a period of one year or less b. Long - Term - predicts for over a year and sometimes 5-10 years 2. Developing budgets to meet those needs a. Budget- a financial plan that sets forth management i. Capital Budget- Highlights spending for major asset purchases
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Unformatted text preview: that often require large sums of money ii. Cash Budget-Estimates projected cash inflows and outflows that can be used to plan for cash shortages iii. Operating Budgets-Projection of dollar allocations to various costs and expenses needed 3. Establishing Financial Controls a. A process in which a firm periodically compares its actual revenues, costs, and expenses w/ its projected ones. Money has a time value which means that it can be invested in a way that can procure more money at a later date. Businesses must maintain inventories that often involve a sizable expenditure of funds. 4 Major Financial Needs for a Firm 1. Managing Day-by-Day needs of the business 2. Controlling Credit Operations 3. Acquiring Needed Inventories 4. Making Capital Expenditure...
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This note was uploaded on 03/02/2009 for the course AEM 2200 taught by Professor Perez,p.d. during the Summer '07 term at Cornell.

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