Finance
The function in a business that acquire funds for the firm and manages those funds within the firm
Financial Management
The job of management a firm's resources so it can meet its goals and objectives
Financial managers
Managers who examine financial data prepared by accountants and recommend strategies for improving the financial performance of the firm
Skills needed by CFO's
Analytical thinking, strategic planning, leadership, objectivity
Tasks perform by financial managers
Planning, budgeting, obtaining funds, controlling funds, collecting funds, auditing, managing taxes.
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.
Capital budget
A budget that highlights a firm's spending plans for major asset purchases that often require large sums of money. Ex. Property, buildings, equipment
Cash budget
A budget that estimates cash inflows and outflows during a particular period like a month or a quarter. Helps managers anticipate borrowing needs, debt repayment, operating expenses, short-term investments, often last budget prepared.
Operating (master) Budget
The budget that ties together the firm's other budgets and summarizes its proposes financial activities.
Financial control
Is a process in which a firm periodically compares its actual revenues, costs and expenses with its budget. It helps identify variances to their financial plan and allow them to take corrective action if necessary.
Debt financing
Funds raised through various forms of borrowing that must be repaid
Equity financing
Money raised from within the firm, from operations or through the sale of ownership in the firm (stock or venture capital)
Short-term financing
Funds needed for a year or less
Long-term financing
Funds needed for more than a year (usually 2 to 10 years)
Short term funds
monthly expenses, unanticipated emergencies, cash flow problems, expansion of current inventory, temporary promotional programs.
Long-term funds
New product development, replacing capital expenditure, mergers or acquisition, expansion into new markets, building new facilities
Trade credit
The practice of buying goods and services now and paying for them later
Promissory note
A written contract with a promise to pay a supplier a specific sum of money at a define time
Secure loan
A loan backed by collateral such as property
unsecured loan
a loan that doesn't require any collateral
line of credit
A given amount of unsecured short-term funds a bank will lend to a business, provided the funds are ready available.
Factoring
The process of selling accounts receivable for cash
Commercial paper
Unsecured promissory notes of $100,000 and up that mature in 270 days or less.
Debt financing
Borrowing money the company has a legal obligation to repay