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Chapter Nineteen

Chapter Nineteen. Financial Management. Finance & Managers. What is Financial Management? Finance Financial Manager Importance of Finance. What Financial Managers Do (Figure 19.1). Most Important Skills Needed by CFOs. Source: CIO Enterprise , 3/15/1999.

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Chapter Nineteen

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  1. Chapter Nineteen Financial Management

  2. Finance & Managers • What is Financial Management? • Finance • Financial Manager • Importance of Finance

  3. What Financial Managers Do (Figure 19.1)

  4. Most ImportantSkills Needed by CFOs Source: CIO Enterprise, 3/15/1999

  5. Non-Finance Functions of a CFO Source: CIO Enterprise

  6. Where CFOs Get Their Financial Information Source: USA Today

  7. Financial Planning Process Forecast Cash Flow Short-term & Long-term Uses Budget Cash Needs Operating, Cash, & Capital Compare Results Modify Forecasts & Budgets Control Differences Actual vs. Projected Flows

  8. Operating Funds Needs • Manage Daily Operations • Manage Accounts Receivable • Acquire Inventory • Capital Expenditures

  9. Financing DailyOperations- Cash Flows Money Received From: (Cash In) Business Expenses: (Cash Out) • Inventory Purchases • Payment on Loans • Payment on Assets • Salaries Payable • Supplies • Taxes • Credit Sales • Cash Sales • Investment Income

  10. Uses of Excess Funds Expansion Marketable Securities EXCESS Treasury Bills FUNDS Commercial Paper Certificates of Deposit Asset Purchases

  11. Short-Term Trade Credit Promissory Notes Family/Friends Banks, etc. Secured Loan Unsecured Loan Factoring Commercial Paper Long-Term Debt Term-Loan Bonds Secured Unsecured Equity Stock Retained Earnings Venture Capital Sources of Funds

  12. Who Can Issue Bonds? (Figure 19.4) • Federal, state, and local governments • Federal government agencies • Corporations • Foreign governments and corporations

  13. Sources ofEquity Capital Retained Earnings Internal Sources Owner Contributions Sale of Partnerships Equity Capital Venture Capital External Sources Public Sale of Stock

  14. Common Stock $ 30,000 Bonds (@10%) $200,000 Funds Raised $230,000 Earnings $ 35,000 Less: Bond Interest $ 20,000 Total Earnings $ 15,000 Return to $15,000 Stockholders $30,000 Common Stock $230,000 Bonds (@10%) 0 Funds Raised $230,000 Earnings $ 35,000 Less: Bond Interest $ 20,000 Total Earnings $ 15,000 Return to $35,000 Stockholders $230,000 Making Use of Leverage Leverage- Selling Bonds Equity- Sale of Stock = = 50% = = 15.2%

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