Chapter 19,20 -Finance slides for printing Mar 24,31

Chapter 19,20 -Finance slides for printing Mar 24,31 -...

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RSM100 An Introduction to Business and Management John M. Oesch Rotman School, University of Toronto
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2 What is Finance? Finance is the business function involving a firm’s day to day financial activities and decisions about a firm’s long -term investments and how to obtain those funds to pay for them
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3 Finance is broken into two major areas Corporate finance How companies obtain and use funds Investments Analysis of financial securities including how they are valued Process of raising the funds for companies (can be considered under corporate finance) The two pieces are linked and build on the exist-ence and efficient functioning of capital markets (to be discussed next class)
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4 Some Finance-Related Careers Managers, CEOs, CFOs Works inside the organization Makes decision that will best bring in sustaining future profits for firm Traders Conducts trades for client firms to help meet their financial goals more short-term focused Analysts (CFAs) – evaluates investments and makes buy, sell, and hold recommendations on securities Financial planners (CFPs) – assists individuals/firms in achieving long-term financial goals by setting up investing programs to do so
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5 Finance in the Commerce Program MGT337Y Business Finance (first exposure to finance concepts) Upper year electives MGT330H Investments MGT430H Fixed Income Securities MGT438H Futures and Options Markets MGT439H International Finance
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6 Responsibilities of a Financial Manager: 1. Financial Control 2. Financial Planning 3. Cash Flow Management
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7 Financial Control Checking actual performance against strategic plans to ensure that desired goals are achieved Making adjustments as required when plans change, or do not work as intended Preparing budgets to ensure that sufficient cash is on hand to meet operational & debt service needs Actual results that vary from the budget need explanation and adjustment
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8 Financial Planning A plan for achieving a desired financial status in the future Projections of revenue flows Sources & planned uses of funds Timing of when funds will be required
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9 Cash Flow Management Managing the pattern of cash inflows (revenues) and outflows (debt payments) Investing funds that are not needed to service debt to maintaining the firm, or earning interest, not sitting idle
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10 The Cash Flow Cycle Collect cash on sales Stock arrives Pay suppliers & workers Produce then sell goods Order materials Financing required during this period Repeat
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11 Finance Requirement Between paying suppliers and receiving the cash from customers, a company needs financing to keep up with operating and selling expenses An adequate amount of cash is needed to maintain daily operations and to pay bills on time
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12 Example Hockey Puck Manufacturer (HP) Small manufacturing company with 2 owners Each contributes $25,000 to start the business on January 1, 2010 Equipment costing $30,000 is purchased with cash and a factory is rented out in Toronto
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Chapter 19,20 -Finance slides for printing Mar 24,31 -...

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