Chapter 15 Notes.docx - Chapter 15 Financial Decisions and...

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Chapter 15 – Financial Decisions and Risk ManagementLO-1- roles of financial managementFinance – the business function involving decisions about a firm’s long-term investments and obtaining thefunds to pay for those investments (3) conducting firm’s everyday financial activities & (4) managing the risksthat the firm takesCash-flow management – managing the pattern in which cash flows into the firm in the form of revenues andout of the firm in the form of debt paymentsFinancial control – the process of checking actual performance against plans to ensure that the desired financialstatus is achievedFinancial plan – a description of how a business will reach some financial position it seeks for the future;includes projections for sources and uses of fundsLO-2 – why businesses need fundsShort-term (operating) expenditures:Accounts payable: unpaid bills owed to suppliers plus wages and taxed due w/ in a yearAccounts receivable: funds due from certain customers who have bought on credit- credit policy: the rules governing a firm’s extension of credit to customers (2/10 net 30)Inventory – materials and goods currently held by the company that will be sold w/ in the yearLO-3 – sources of short-term fundsTrade credit – the granting of credit by a selling firm to a buying firmOpen-book credit, promissory notes, trade drafSecured loans – a short-term loan in which the borrower is required to put up collateralInventory as Collateral - lender lends the borrower a portion of the stated value of the inventoryAccounts receivable as collateral – lender may seize the receivables (funds owed the borrower by itscustomers)

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Term
Spring
Professor
N/A
Tags
Finance, Business, Management,

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