Chapter 15 resume - Chapter 15: Financial Decisions and...

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Chapter 15: Financial Decisions and Risk Management:1)Finance involves four key responsibilities-Determine a firm’s long term investments-Obtain funds to pay for those investments-Conduct the firm’s everyday financial activities- Help manage the risks that a firm takesThe financial Manager: responsible for planning and observing the financial resources of a firmincluding : - cash-flow management, financial planning, financial control.Cash Flow Management:. Managing the pattern of cash inflows(revenues) and outflows(debt payment). Investment funds that are not needed to service debt. Funds must either be committed to maintaining the firm, or earning interest, not sitting idleFinancial Control:. Checking performance against strategic plans. Marking adjustments. Preparing budgets to ensure that sufficient cash is on hand to meet operational and debt- serviceneedsFinancial Planning:. A plan to achieve a desired financial status:. projections of revenue flows. sources and planned uses of funds to meet both short and long term goals. timing of when funds will be required2) Why do businesses need funds?Short term (operating) expenses-accounts payable-accounts receivable(credit policy)-inventory(-raw materials, work in process)Long-term (Capital) Expenditures:-funding fixed assets that have a long life and a lasting value- not normally sold or converted to cash- ties up the firm’s resources for a long period of time3) Sources of short-term funds.Short-term Funds:allows firms to cover operational expenses and implement short-term plans-Trade credit- secured loans- unsecured loans- factoring accounts receivableTrade credit:the granting of credit by a selling firm to a buying firm.- Open-book credit- Promissory note- Trade draftSecured Short-Term Loans:a short-term loan for which the borrower is required to put upcollateral- interest rates are usually lower than for unsecured loans- appeals to firms whose credit rating is not sufficient (or who are too new) to qualify forunsecured loans
Unsecured short-term loans: -Line of credit- Revolving Credit Agreements- Commercial Paper4) Sources of Long-term Funds:- Debt Financing- Equity Financing- Hybrid Financing

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Term
Spring
Professor
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Tags
Stock exchange, secondary securities market

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