Ch 8 - CHAPTER 8 ASSESSING A NEW VENTURE'S FINL STRENGTH &...

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CHAPTER 8 Financial management deals with: 1. raising money & 2. managing a co’s finances so to achieve the highest rate of return. e.g., - How much cash do we have on hand? - Do we have enough cash to meet our short-term obligations? - How efficiently are we utilizing our assets? - How does our growth and net profits compare to those of our industry peers? - Where will the funds we need for capital improvements come from? - Are there ways we can partner with other firms to share risk and reduce the amount of cash we need? - Overall, are we in good shape financially? FINANCIAL OBJ’S OF A FIRM Profitability - the ability to earn a profit. Liquidity - a company’s ability to meet its short-term financial obligations. Efficiency - how productively a firm utilizes its assets relative to its revenue and its profits. Stability - the strength and vigor of the firm’s overall financial position. THE FINANCIAL MANAGEMENT PROCESS 1. Financial statements - a written report that quantitatively describes a firm’s financial health. 2. Forecasts - an estimate of a firm’s future income and expenses, based on its past performance, its current circumstances, and its future plans. 3. Ratio analysis - Ongoing analysis of a firm’s financial results/ratios—.
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1. FINANCIAL STATEMENTS - reflect past performance (usually prepared on a quarterly and annual basis) Most common: 1. Income statement, 2. the balance sheet, & 3. the statement of cash flows
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This note was uploaded on 03/28/2011 for the course MNGT 305 taught by Professor Chadwick during the Spring '11 term at Nicholls State.

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Ch 8 - CHAPTER 8 ASSESSING A NEW VENTURE'S FINL STRENGTH &...

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