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Chapter Nineteen

Chapter Nineteen. Mastering Financial Management. 19 | 1. Learning Objectives. Explain the need for financial management in business Summarize the process of planning for financial management Describe the advantages and disadvantages of different methods of short-term debt financing

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Chapter Nineteen

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  1. Chapter Nineteen Mastering Financial Management 19 | 1

  2. Learning Objectives • Explain the need for financial management in business • Summarize the process of planning for financial management • Describe the advantages and disadvantages of different methods of short-term debt financing • Evaluate the advantages and disadvantages of equity financing • Evaluate the advantages and disadvantages of long-term debt financing 19 | 2

  3. What Is Financial Management? • Define Financial Management • Why is financing an important concern for businesses? • Define • Short-Term Financing • Inventory • Cash Flow • Long-Term Financing • Be prepared to compare short- and long-term financing, including when a business needs each kind 19 | 3

  4. The Need for Financial Management • Be prepared to discuss Financial Management during the most recent Economic Crisis • Obtaining Financing • Stock Prices • Bankruptcies • What must financial management ensure at all times? • What steps have been taken after the financial crisis to enact Financial Reform? • Goals and controversies • Define the Risk-Return Ratio 19 | 4

  5. Careers in Finance • What are the skills and traits of successful financial managers? • What jobs are available in the financial field? 19 | 5

  6. Financial Planning • Define Financial Plan • What goes into Developing the Financial Plan? • Know the Three Steps of Financial Planning • Define Organizational Goal • What are key characteristics of an organizational goal? 19 | 6

  7. Developing the Financial Plan • Define • Budget • Cash Budget • Traditional • Zero-Based Budgeting • Capital Budget • Know the Sources of Funds • Sales Revenues • Equity Capital • Debt Capital • Proceeds from the Sale of Assets • Why is Monitoring and Evaluating Financial Performance important? 19 | 7

  8. Sources of Short-Term Debt Financing • Know the main Sources of Unsecured Short-Term Debt Financing • What is the appeal of short-term financing over long-term? What is the downside? • Define • Unsecured Financing • Trade Credit • Promissory Notes • Unsecured Bank Loans • Commercial Paper 19 | 8

  9. Sources of Secured Short-Term Financing • What is the difference between Loans Secured by Inventory andLoans Secured by Receivables? • Define Factor • Be able to describe how factors handle accounts receivables • Be able to make comparisons between different sources of short-term financing 19 | 9

  10. Sources of Equity Financing • Know the Sources of Equity Financing for Sole Proprietorships/Partnerships andCorporations • How does financing differ between these different organizational forms? • Be prepared to discuss Stockand Initial Public Offerings (IPOs) • What are the advantages and disadvantages of selling stock over other forms of financing? 19 | 10

  11. Selling Stock • Define • The Secondary Market • Securities Exchange Market • Over-the-Counter (OTC) Market • Common Stock • Preferred Stock • Par Value 19 | 11

  12. Equity Financing • Define • Retained Earnings • Venture Capital • Private Placement • Financial Leverage • Be prepared to discuss how additional capital affects a firm and its earnings potential 19 | 12

  13. Sources of Long-Term Debt Financing • Discuss Long-Term Loans and other Long-Term Debt Financing • What is a Term-Loan Agreement? • Know the basics of getting a loan • Define Corporate Bond • Different types of bonds • Registered Bond • Debenture Bond • Mortgage Bond • Convertible Bond • What is a Maturity Date? 19 | 13

  14. Repaying Corporate Bonds • Be able to define and discuss the Repayment Provisions for Corporate Bonds • Bond Indenture • Call Premium • Serial Bonds • Sinking Fund • Trustee • Be prepared to compare different long-term financing methods 19 | 14

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