The Science and art of managing money
Finance
The act of estimating revenue and expenses over a period of time
Budgeting
The act of bringing money into the organization
Financing
Give three methods of financing
a. Taking on debt
b. Credit arrangement
c. Investments on real assets and financial assets
Is an integrated strategy that takes into account various departments such as sales, production, marketing, and operations
Long-Term Financial Plans
Specify short term financial actions and the anticipated impact of those actions. Solving immediate problems and developing strategies that will lend to results usually within one year
Short-Term Financial Plans
For a business enterprise, having the right amount of cash is important since cash is used to make payments for purchases
Cash Budget
This includes collections from receivables, proceeds from loans or issuance of new shares of stock
Cash Receipt
This is the cash used for paying
ex. expenses such as salaries. utilities, rent, and taxes
Transactional
The cash held to meet bank requirements such as the minimum cash balance for checking accounts
Compensating Balance
What are the two primary reasons for holding cash
Transactional and Compensating Balance
Is the cash maintained for emergencies such as the additional cash you keep during political and economical uncertainties
Precautionary
Refers to the cash held by the company to take advantage of opportunities
Speculative
What are the two secondary reasons for holding cash
Precautionary and Speculative
Measure of a company’s total financial resources
Gross Working Capital
Provides a much more thorough comprehensive picture of a company’s financial health
Net Working Capital
What are the two concepts of working capital
Gross Working Capital and Net Working Capital
Objectives of Financial Management
Which of the following is incorrect?
a. ensures regular and adequate supply of funds
b. ensures adequate returns of shareholders
c. ensures optimum fund utilization
d. ensures safety of investments to achieve adequate rate of return.
e. plan a sound capital structure so that the balance between equity capital will be maintained
d. ensures that the company receives their liquid assets by the end of the year
D
Give the four functions of the CFO (Chief Financial Officer)
- Financing
- Investing
- Operating
- Dividend Policies
Elect the board of directors each share held is equal to one voting right
Shareholders
The highest policy making body in a corporation
Board of Directors
The role of a president in a corporation may vary from one company to another
President (Chief Executive Officer CEO)
The sale of either bonds or stock to the general public
Public Operate
Brings buyers and sellers together to trade stocks, bonds, currencies, and other financial assets
Capital Market
Where investors buy and sell securities they already own
Secondary Market
