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New Venture slides d - Assessing a New Venture's Financial Strength and Viability Professor Joshua Hernsberger The Paul Merage School of Business

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Professor Joshua Hernsberger The Paul Merage School of Business University of California, Irvine Assessing a New Venture’s Financial Strength and Viability
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Financial Management Financial Management deals with two things: Raising money Managing a company’s finances in a way that achieves the highest rate of return .
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Financial Management Questions for Financial Management How are we doing? Are we making or losing money? 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? Are we in good shape financially?
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Financial Objectives of a Firm Profitability Is the ability to earn a profit. Many start-ups are not profitable during their first one to three years while they are training employees and building their brands. However, a firm must become profitable to remain viable and provide a return to its owners. Liquidity Is a company’s ability to meet its short-term financial obligations. Even if a firm is profitable, it is often a challenge to keep enough money in the bank to meet its routine obligations in a timely manner.
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Financial Objectives of a Firm Efficiency Is how productively a firm utilizes its assets relative to its revenue and its profits. Southwest Airlines, for example, uses its assets very productively. Its turnaround time, or the time its airplanes sit on the ground while they are being unloaded and reloaded, is the lowest in the airline industry. Stability Is the strength and vigor of the firm’s overall financial posture. For a firm to be stable, it must not only earn a profit and remain liquid but also keep its debt in check.
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Financial Statements Historical Financial Statements Reflect past performance and are usually prepared on a quarterly and annual basis.
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This note was uploaded on 01/31/2012 for the course MGMT 190 taught by Professor Joshuahernsberger during the Summer '11 term at UC Irvine.

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New Venture slides d - Assessing a New Venture's Financial Strength and Viability Professor Joshua Hernsberger The Paul Merage School of Business

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