BUS_200_CH_15.pdf - BUS 200 E100 Week 12 Business...

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BUS 200 E100 Week 12 Business Fundamentals
Financing a Business
Describe the responsibilities of a financial manager Distinguish between short-term ( operating ) and long-term (capital) expenditures. Identify three sources of short-term financing for businesses. Identify three sources of long-term financing for businesses. . Chapter 15 – Learning Objectives
Discuss the value of common stock and preferred stock to stockholders and describe the secondary market for each type of security. Explain the process by which securities are bought and sold. Describe the investment opportunities offered by mutual funds , hedge funds , commodities and stock options. Explain how risk affects business operations and identify the five steps in the risk management process. , Chapter 15 – Learning Objectives
Financial Managers
Financial Managers Finance involves four key responsibilities: Determine a firm’s long-term investments Obtain funds to pay for those investments Conduct the firm ± s everyday financial activities Help manage the risks that a firm takes
• The Finance Manager is responsible for planning and overseeing the financial resources of a firm The Role of the Finance Manager Cash-flow management Financial planning Financial control
Financial Planning: • a plan to achieve a desired financial status: – projections of revenue flows – sources and planned uses of funds to meet both short- and long-term goals – timing of when funds will be required The Role of the Finance Manager
Financial Control: • Checking performance against strategic plans • Making adjustments • Preparing budgets to ensure that sufficient cash is on hand to meet operational and debt- service needs The Role of the Finance Manager
Why Businesses Need Funds short term expenses long term expenditures
Accounts Payable Accounts Receivable - Credit policy Inventory - Raw materials - Work in process - Finished Goods Short-Term (Operating) Expenses helps estimate cashin flow to ensure timely payments basic supplies goods being manufactured ready for sale
–funding fixed assets that have a long life and a lasting value land, buildings, machinery –not normally sold or converted to cash –acquisition requires a large investment; ties up the firm’s resources Long-Term (Capital) Expenditures
• Short-Term Funds – allows firms to cover operational expenses and implement short-term plans Sources of Short-Term Funds Trade credit Secured loans Unsecured loans Factoring accounts receivable

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