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How Does a CFO Think?

How Does a CFO Think?. Financial Issues/Measures for CFO’s. Profitability Operating profit margins Asset turnover ROA (return on assets) Leverage/financial structure ROE (return on equity). Financial Issues/Measures for CFO’s. Size Breakeven volume Viability Level of living

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How Does a CFO Think?

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  1. How Does a CFO Think?

  2. Financial Issues/Measures for CFO’s • Profitability • Operating profit margins • Asset turnover • ROA (return on assets) • Leverage/financial structure • ROE (return on equity)

  3. Financial Issues/Measures for CFO’s • Size • Breakeven volume • Viability • Level of living • Market access

  4. Financial Issues/Measures for CFO’s • Growth • Resources • Managerial • Financial • Sustainable growth rate

  5. Economic Value Added (EVA) • Economic profit • A measure of value added • Better than ROE as an indicator of creation of value • Calculation reflects the idea that firm must earn enough to cover the cost of debt and the opportunity cost of equity before it even begins to create value

  6. Areas of responsibility for CFO’s • Total Financial Resources • Liquidity • Leverage • Profitability • Cash Flows • Cost of Capital • Interest rate • Dividend payout

  7. Areas of responsibility for CFO’s • Insurance Coverage and Risk Management • Financial Planning Procedures • Working capital • Capital budgeting • Accounting Systems and Procedures • Cost control • Profit planning • Business performance • Auditing

  8. Areas of responsibility for CFO’s • Capital Structure • Balance • Leverage • Ability to raise capital • Relationship with Financial Stakeholders • Tax Considerations and Management

  9. Areas of responsibility for CFO’s • Inventory Management and Valuation • Asset Management • Capital expenditures • Financial diversification

  10. Strategic Business Planning for Commercial Producers

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