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MGT 1281 Chapter 17 (Financial Management)
MGT 1281 Chapter 17 (Financial Management)
Chapter 17:
The Role of Finance and
Financial Managers
• Finance: the function in a business that acquires
funds for the firm and manages those funds
within the firm.
• Financial Management: the job of managing a
firm’s resources so it can meet its goals and
objectives.
• Financial Managers: make recommendations to
top executives regarding strategies for improving
the financial strength of a firm.
Financial Planning
Working with the Budget Process
• Budget: a financial plan that sets forth management’s
expectations, and, on the basis of those expectations,
allocates the use of specific resources throughout the firm.
• Types of Budgets
– Operating (Master)
– Capital
– Cash
• Financial controls: comparing actual revenues, costs, and
expenses with the budget.
Sample Cash Budget
Need for Funds
Internal
Internal Retained
Retained
Sources Earnings
Earnings
Sources
Equity
Equity
Capital
Capital Venture
Venture
External Capital
Capital
External
Sources
Sources
Public
PublicSale
Saleof
of
Stock
Stock
Selling Stock as Equity Financing
• IPO: Initial Public Offering
• Stock certificate
• Dividends
• Common shares
• Preferred shares
Differences between Debt
and Equity Financing
Comparison of Bonds and
Stocks of Public Companies
Optional Features of Preferred Shares