Chapter 18 - Chapter 18: Managing Finance and Financial...

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Chapter 18: Managing Finance and Financial Managers Finance-  the function in a business that acquires funds for the firm and manages those funds  within the firm Financial management-  job of managing a firm’s resources so it can meet its goals and  objectives Financial managers-  managers who make recommendations to top executives regarding  strategies for improving the financial strength of the firm - Financial management could be in hands of a person who serves as the company  treasurer or vice president of finance - A comptroller is the chief  accounting  officer What Financial Managers do - Auditing - Managing taxes - Advising top management on financial matters - Collecting funds(credit management) - Controlling funds (funds management) - Obtaining funds - Budgeting - Planning Most Common ways for a firm to fail financially 1) Undercapitalization(lacking enough funds to start the business) 2) Poor control over cash flow
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3) Inadequate expense control What is Financial Management? - Finance functions sssuch as buying merchandise on credit aaand   collecting  pppayment from customers are responsibilities of financial managers o Financial managers are responsible for paying the company’s bills at the  appropriate time and for collecting overdue payments to make sure that the  company doesn’t lose too much mmmoney   to bad debts  - Tax payments represent an outflow of cash from the business o Financial managers must be involved in tax management and must keep  abreast of changes in tax law o Financial managers carefully analyze the tax implications of various  managerial decisions in an attempt to minimize the teaaaxes paid by the  business Financial Planning - Financial planning is a key responsibility of the financial manager in a bbbusiiiness - Overall objective of financial planning is to optimize the firm’s profitability and make  the best use of its money Financial Planning involves: 1) Forecasting both short-term and long-term financial needs 2) Developing budgets to meet those needs 3) Establishing financial control to see how well the company is doing what it set out to do
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Forecasting Financial Needs Short-term forecast-  predicts revenues, costs, and expenses for a period of one year or less
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Chapter 18 - Chapter 18: Managing Finance and Financial...

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