VKSF 423 System Administration III

1. VKSF 423 System Administration III Finance for NSA Managers

2. Announcements • Practical Exam • Practical Checklist • Make appt. with either Mitch or myself by group • All groups must be done by the end of week 10. • Final exam Wednesday 5/12 in class • Review 5/10 in class • I will post all the notes I can get to the course conference

3. Syllabus Modifications

4. Finance for NSA Managers • Organizational context • What are your financial responsibilities? • What does your organization do? • Are you a profit center? • Are you a cost center? • How does that impact your financial responsibilities?

5. How Does Your Organization Get the Money It Needs to Operate? • Start-up funds • Trade credit • Commercial banks • On-going funds • Cash flows from operations • External financing • Common stock • Commercial loans and paper • Bonds • Preferred stock

6. Life Cycle view of Financing • Start-up • Savings • Friends and relatives • Angels • Venture capital • Trade credit (30 to 60 day) • Growth 1 • Private sale of shares • Local banks • Venture capital • Asset-based loans or leases

7. Life Cycle view of Financing cont. • Growth 2 • IPO • Money center banks and/or finance companies • Asset-based loans or leases • Maturity • Commercial paper • Bond-issues • Follow-on share issues • Money center banks and/or finance companies • Asset-based loans or leases

8. Budgeting Functions • Planning • Choosing goals • Reviewing options and predicting results • Deciding on options • Coordinating and communicating • Gathering input from the several units within the organization • Making sure that units support eachother • Communicate expectations of senior management

9. Budgeting Functions cont. • Monitoring Progress • Assess progress of units toward overall goal • Positive or negative variances • Evaluating Performance • Motivate employees through rewards based on performance • Provide basis for compensation decisions • Create a basis for future resource allocations

10. Types of Budgets • Short-term budgets versus Long-term budgets • Match budget term to needs • Fixed term budgets versus Rolling budgets • Firm life cycle issues • Cash flow issues • Incremental budgeting versus zero-based budgeting • What is the basis for the budget? • Unit budgets versus The Master Budget

11. Budgeting Assumptions • What are the sales and marketing expectations for unit sales and revenues from new and existing products? • Are supplier prices expected to rise or fall? • What will be the cost of capital over the coming year? • What external factors do we need to be concerned with and how are they expected to change over the budget period?

12. Top Down versus Participatory Budgeting • Top-Down, goals set by senior management • Budget goals reflect senior management’s more strategic vision • Better coordination of budget requirements for all units • Discourages unit managers padding of budgets • High goals encourage managers to stretch to meet them

13. Top Down versus Participatory Budgeting cont. • Participatory • People responsible for achieving goals involved in setting goals • Potential for a lack of strategic view • Optimal budgets for all the units may not add up to an optimal budget for the organization

14. Tools for Management Decision Making • Cost/Benefit analysis • Accounting Return on Investment • Payback Period • Breakeven Analysis • Fixed costs • Variable costs • Contribution margin • Operating leverage

15. Time Value of Money • A dollar today is not the same as a dollar tomorrow • Present value x FVIF = Future Value • Net Present Value • Risk versus reward • Single payback versus annuity • Comparison to a zero risk investment