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Managing Financial Resources-Introduction to Business-Assignment Solution, Exercises of Business Fundamentals

This is assignment for Introduction to Business course given by Dr. Sachin Jeven at Graphic Era University. It includes: Managing, Financial, Resources, Planning, Obtaining, Objectives, Effective, Develop, Implement

Typology: Exercises

2011/2012

Uploaded on 07/06/2012

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Managing Financial Resources
Finance—business function of planning, obtaining, and managing a company’s
funds in order to accomplish its objectives in the most effective possible way.
Finance manageremployee responsible for developing and implementing the
firm’s financial plan and for determining the most appropriate sources and uses of
funds.
1. The major responsibility of financial managers is to develop and implement a
financial plan for their organization.
2. The firm’s financial plan is based on forecasts of expenditures and receipts for a
specified period and reflects the timing of cash inflows and outflows.
3. The financial managers systematically determine the company’s needs for funds
during the period and the most appropriate sources for obtaining them.
4. In short, the financial manager is responsible for both raising and spending
money.
Chief financial officertop finance executive of a corporation; usually reports
directly to the firm’s CEO.
VP for Financial Management
Treasurer
Controller
All address the risk-return trade-off
A. Organizations are placing greater emphasis on measuring and reducing the costs of
conducting business as well as increasing revenues and profits.
B. Financial managers are executives responsible for developing and implementing their
firm's financial plan and for determining the most appropriate sources and uses of funds.
C. The finance organization of a typical company consists of three levels, including:
•at the top is the CEO -- Chief Executive Officer
•second there is the CFO -- Chief Financial Officer
•thirdly, there are three executives, who are commonly called the vice president for
financial management, the treasurer, and controller.
The Financial Plan
Document specifying the funds a firm will need for a period of time, the
timing of inflows and outflows, and the most appropriate sources and uses
of funds.
What funds will the firm require during the appropriate period of
operations?
How will it obtain necessary funds?
When will it need more funds?
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Managing Financial Resources

Finance —business function of planning, obtaining, and managing a company’s funds in order to accomplish its objectives in the most effective possible way.

Finance manager —employee responsible for developing and implementing the firm’s financial plan and for determining the most appropriate sources and uses of funds.

  1. The major responsibility of financial managers is to develop and implement a financial plan for their organization.
  2. The firm’s financial plan is based on forecasts of expenditures and receipts for a specified period and reflects the timing of cash inflows and outflows.
  3. The financial managers systematically determine the company’s needs for funds during the period and the most appropriate sources for obtaining them.
  4. In short, the financial manager is responsible for both raising and spending money.

Chief financial officer —top finance executive of a corporation; usually reports directly to the firm’s CEO.  VP for Financial Management  Treasurer  Controller  All address the risk-return trade-off

A. Organizations are placing greater emphasis on measuring and reducing the costs of conducting business as well as increasing revenues and profits.

B. Financial managers are executives responsible for developing and implementing their firm's financial plan and for determining the most appropriate sources and uses of funds.

C. The finance organization of a typical company consists of three levels, including: •at the top is the CEO -- Chief Executive Officer •second there is the CFO -- Chief Financial Officer •thirdly, there are three executives, who are commonly called the vice president for financial management, the treasurer, and controller.

The Financial Plan  Document specifying the funds a firm will need for a period of time, the timing of inflows and outflows, and the most appropriate sources and uses of funds.  What funds will the firm require during the appropriate period of operations?  How will it obtain necessary funds?  When will it need more funds?

  1. Financial managers develop their organization's financial plan, a document that specifies the funds needed by a firm for a period of time, the timing of inflows and outflows, and the most appropriate sources and uses of funds.
  2. Based on forecasts of production costs, purchasing needs, and expected sales activities for the period covered
  3. A good financial plan involves financial control, a process of checking actual revenues, costs, and expenses and comparing them against forecasts.

Money —anything generally accepted as payment for goods and services.

Functions of Money

  1. a medium of exchange: a means of facilitating economic transactions and eliminating the need for a barter system
  2. a unit of account: a common standard for measuring the value of goods and services
  3. a temporary store of value: a way of keeping accumulated wealth until the owner needs it to make new purchases.

Why Organizations Need Money

A. Organizations require funds for many reasons, including: •to run day-to-day operations •to compensate employees and hire new ones •to pay for inventory •to make interest payments on loans •to pay dividends to shareholders •to purchase property, facilities, and equipment.

B. By comparing these needs with expenditures and expected cash receipts, financial managers determine precisely what additional funds they must obtain at any given time.

Sources of Funds

Debt capital -- represents funds obtained through borrowing

Equity capital

  1. Consists of funds provided by the firm's owners when they reinvest earnings, make additional contributions, or liquidate assets
  2. Also generated when stock is issued to the general public
  3. Capital rose from venture capitalists and other investors

Short-Term Sources of Funds  Short-term sources of funds are repaid within one year  Major sources of short-term funds include:  Trade creditShort-term loans

  1. Savers choose not to spend all of their current income, so they have a surplus of funds.
  2. Users spending needs exceed their current income so they have a deficit.
  3. Financial institutions have been classified into depository institutions which accept deposits that customers can withdraw on demand, and non-depository institutions.