Vi

l
lanuev
aAr
winL.

BSACC2BLK-
1

1.Whati
sthepurposeoffi
nanci
almanagement
?Descr
ibet
heki
ndsofact
ivi
ti
est
hatf
inanci
al
managementdeal
swith.

Fi
nancialmanagementist
hepracti
ceofstr
ategical
l
yplanni
ng,di
rect
ing,or
ganizi
ng,and
cont
roll
ingf
inanci
alev
entsandresour
ceswithi
nanor gani
zati
on.I
tisalsotheprocessof
appl
yingmanagementapproachestot
racki
ngt hefi
nanci
alasset
sofanor gani
zati
on.

Est
imat
ionofCapi
tal
Requi
rement

Howmuchmoneyi srequir
ed?Theanswertothi
squesti
onli
esinhowfinancial
manager s
esti
matethecapit
alrequi
rement.I
tisar
ri
veduponaft
eresti
mati
ngthecompany ’spresent
andfut
urecostsandpr of
it
s,pur
chaseoffi
xedasset
s,worki
ngcapi
tal
requirement,and
busi
nessplansforexpansi
on.

Pr
ocur
ementandAl
l
ocat
ionofFunds

Wher ewil
lthemoneycomef r
om?Fi nanci
almanagementensuresaregularandadequate
supplyoffundsbyidenti
fyi
ngsourcesoffundsandprocuri
ngthem att
hel owestcost.Aft
er
thefundsarepooled,t
henextobjecti
veistoprudent
lyi
nvestt
hem indif
ferentasset
sf or
prof
itabi
l
ity,l
i
qui
dityandsafety
.

Det
ermi
ningt
heSt
ruct
ureofCapi
tal

Whatpr
oporti
onofcapital
shouldbei
nvest
edandhow?Thisiswheref
inanci
almanagement
comesi
ntothepict
ure.Thepri
maryai
m ofsour
cingcapi
tal
istogr
owittoearnret
urnsand
maxi
misesharehol
derwealth.

2.Whati
sthedi
ff
erencei
nper
spect
ivebet
weenf
inanceandaccount
ing?

Thedifferencebetweenfinanceandaccount i
ngisthataccounti
ngfocusesont heday-
to-day
flowofmoneyi nandoutofacompanyori nsti
tuti
on,whereasfi
nanceisabr oadert
ermf or
themanagementofasset sandl i
abil
iti
esandtheplanningoffut
uregrowth.Accounti
ngis
mor eaboutaccur at
ereporti
ngofwhathasal readyhappenedandcompl i
ancewi thl
awsand
standar
ds.Fi nanceisaboutlookingforwar
dandgr owingapotofmoneyormi ti
gati
nglosses.
Ifyouli
ket hi
nkinginter
msofal ongertimehori
zonyoumaybehappi eri
nfinancethanin
accounting.
3.Expl
aint
heshar
eholderweal
thmaxi
mizat
iongoaloft
hefi
rm andhowi
tcanbemeasur
ed.
Makeanargumentforwhyiti
sabett
ergoalthanmaxi
mizi
ngprofi
t.

Theshar ehol
derwealthmaximi zationgoal statesthatmanagementshoul dseekt omaxi mize
thepresentvalueoftheexpectedf uturereturnstot heowner s(t
hatis,shareholders)ofthe
fi
rm.Theser et
urnscant akethef or m ofper i
odicdividendpay mentsorproceedsf rom the
saleofthecommonst ock.Weal t
hmaxi mizationmeansofshar ehol
der’swealth.Itisa
combinat i
onoftwowor dsv i
z.weal thandmaxi mization.Awealthofashar eholder
maximizeswhent henetworthofcompanymaxi mizes.Weal t
hmaxi mizati
oni stheabili
tyofa
companyt oincreasethemar ketv alueofi t
scommonst ockoverti
me.Themar ketval
ueof
thefi
rmi sbasedonmanyf actorsl iketheirgoodwi l
l,sales,
servi
ces,quali
tyofpr oducts.

4.Nameanddescr
ibeasmanycor
por
atest
akehol
der
sasy
oucan.

Suppli
ers,
Owners,
Invest
ors,
Credi
tor
s,Communi
ti
es,
Tradeuni
ons,
Empl
oyees,
Gov
ernment
agenci
es,Cust
omers,
Media

5.Whatconf
li
ctsofi
nter
estcanar
isebet
weenmanager
sandst
ockhol
der
s?

I
famanagerisalsoast ockholder
,thepotenti
alforconfl
i
ctari
sesimmediatel
y.Themanager
mayhavepowertodi rectfinanci
aldeci
sions,tounil
ater
all
ychangehis/
hercompensation,t
o
makeoperat
ionaldecisionsinfavoroffamilyandfri
ends,anddootherthi
ngsthatbenefi
t
t
hemselv
esandt heirclosef amil
yandfriendsattheexpenseofothershar
eholder
s.

6.Whatar
ethet
hreetypesoffi
nanci
almanagementdeci
sions?Foreacht
ypeofdeci
sion,
giv
e
anexampl
eofabusinesstr
ansact
ionthatwoul
dberel
evant.

Capi
tal
budget
ing

deci
dingwhet
hert
oexpandamanuf
act
uri
ngpl
ant

Capi
tal
str
uct
ure

deci
dingwhet
hert
oissuenewequi
tyanduset
hepr
oceedst
oret
ir
eout
standi
ngdebt

Wor
kingcapi
tal
management

modi
fyi
ngt
hef
ir
m'scr
edi
tcol
l
ect
ionpol
i
cywi
thi
tscust
omer
s

7.Whatgoal
shoul
dal
way
smot
ivat
etheact
ionofaf
ir
m'sf
inanci
almanager
?

Tomaxthecurr
entmar
ketv
alue(
shar
epr
ice)oft
heequi
tyoft
hef
ir
m(whet
heri
t'
spubl
i
cly
tr
adedornot
).
8.Whatdof
inanci
almanager
str
ytomaxi
mize,
andwhati
sthei
rsecondobj
ect
ive?

Maximi
zet
heweal
thoft
hef
ir
m ort
hepr
iceoft
hef
ir
m'sst
ockal
somaxi
mizeear
ningsper
shar
e

9.I
ntr
yingt
oachi
eveopt
imum pr
ofi
ts,
whatmayaf
ir
m,i
gnor
e?

Mayov erl
ookrisk,i
nvestmentdeci
sionsbasedonhighprofi
tscancauseprofi
tst
odi
sappear
orfl
uctuateexcessi
vely;coul
dleadt
oi nsol
vency
,agreatdealofuncer
tai
nty,
andadecl
i
nein
thepri
ceofthef i
rm'sstock

10.St
atet
heki
ndsofassur
ancest
hati
nvest
orsandcr
edi
tor
sseekf
rom af
ir
m.

I
nvest
orsarel
ooki
ngforthehighestret
urnsatthelowestrisk,
credi
tor
swantthefi
rmto
maint
ainasoundf
inanci
alstr
uctureanditspol
ici
eswillensurepaymentofi
nter
estand
r
epaymentofdon'
twanttotakeunnecessarychances

11.Whatenvir
onmental
consider
ati
onspreventt
hef
ir
mf r
om achi
evi
ngt
hebestr
esul
tsi
nter
ms
ofcostcont
rolandpr
ofi
tabi
l
ity?Expl
ainwhatthi
smeans.

12.Whatar
esomeoft
hemi
cro-andmacr
o-economi
csf
act
orst
hati
nfl
uencet
hedeci
sionsofa
fi
rm?

TheTopmi cr
oeconomicbusinessf act
orsthataff
ectalmostanybusinessarecustomers,
employees,competi
tors,media,sharehol
dersandsupplierswhil
ethetopmacroeconomi c
fact
orsaffect
ingyourbusinessareeconomi cgrowthrates,i
nter
estr
ates,unemployment,
i
nternat
ionaltr
adeandi nf
lat
ion.

13.Whatthreeaccount
ingstat
ementshel
pthemanagermonit
oraf i
rm'sper
for
mance?What
canthebalancesheett
ellt
hefir
m abouti
tsasset
sandf
inanci
alst
ructur
e?

Datafoundi nthebal
ancesheet,theincomest at
ement ,
andthecashf l
owst atementisusedt o
cal
culateimpor t
antf
inanci
alrat
iosthatprov
ideinsightonthecompany ’
sfinancial
performance
andpot ent
iali
ssuesthatmayneedt obeaddr essed.Thebalancesheet,
incomest atement,and
cashflowst at
ementeachof f
eruniquedetai
lswi t
hinformati
onthatisal
linter
connected.
Togetherthethreest
atementsgiveacompr ehensiveportr
ayalofthecompany ’soperat
ing
acti
vi
ties.
14.Whataresomeoft
henonfi
nanci
alaspect
softhemanager
'srol
einsociet
y,suchas
responsi
bil
i
tyt
owar
dworker
s,t
reat
mentofmonitori
es,
anddeali
ngwithgenderprobl
ems?

Genderi nequal
it
yi norganizat i
onsisacompl exphenomenont hatcanbeseeni n
organizati
onalstructures,
pr ocesses,andpractices.Forwomen, someoft hemosthar mful
genderinequalit
iesar eenact edwithi
nhumanr esources(HRs)practi
ces.Thisi
sbecauseHR
practi
ces( i
.e.
,polici
es,decision-making,
andt heirenactment)aff
ectthehiri
ng,
trai
ning,pay
,
andpr omot i
onofwomen.Wepr oposeamodel ofgenderdiscr
iminat
ioninHRt hat
emphasi zesther eci
procalnat ureofgenderinequalit
ieswit
hinorgani
zati
on

15.Besi
desmaxi
mizi
ngt
heweal
thoft
hef
ir
m,whatar
esomeoft
heot
hergoal
soff
inanci
al
management?

Cont
rol
l
ing

Thefi
nancial
managermaintai
nsorcreatesprof
it
abil
i
t ybycontrol
li
ngtheorgani
zati
on's
money,keepi
ngupwithexpensesandmaki nganynecessaryadjustmentstohowthe
companyisspendi
ngmoney .Theyt
rackthesechangesandadj ustmentsrel
ati
vetoproject
ed
out
comessot hatt
hecompanymov estowardachi
evingit
sgoal sandlong-t
erm pr
ofi
tabil
it
y.

Repor
ti
ng

Thefinancialmanageraimst omai ntai

nthecompany '
scompl i
ancewi t
hlegalreport
ing
requi
rement s.Theydothisbycreatingregular
,accuratef
inancialr
eportsandst ay
ing
knowledgeableaboutallrel
evantregulati
ons.Thisisimportantbecausebusinessesr eport
thei
rfinancest othegov
ernmentf ortaxati
onandpubl i
crecordpur poses,andreport
ingt hese
thi
ngsaccur atelyhel
psthebusinessmai ntai
naposi t
ivei
mage.

Pl
anni
ng

Tokeept hecompanypr of
it
able,thef
inanci
almanagermakesproject
ionsandmodel
sforthe
fi
nanci
al f
utur
eoft hecompany .Thei
rstr
ategycani
ncludel
ong-t
erm moneymanagement
andinv
est ment,
plansforexpansionorstr
ategi
cchoi
cesinotherpart
softhecompanythat
haveafinanci
al

Av
oidbankr
upt
cy

Fi
nal
ly
,thefi
nanci
almanagerai
mstokeepthecompanysol
vent
,meani
ngi
thasenough
moneytoconti
nueoper
ati
onsandavoi
dbankrupt
cy.

Li
qui
dit
yMaxi
mizat
ion

Li
quidit
yref
erstotheabili
tyofabusinesstohonorit
sshort-
termli
abi
li
ti
esasandwhent hese
becomedue.Thisabili
tydependsont herat
ioofcurr
entassetstocur
rentli
abi
li
ti
es,t
he
maturit
ypatt
ernsofcurrentsasset
sand‘thecurr
entli
abi
li
ti
es,thecompositi
onofcurrent
assets,t
hequali
tyofnon-cashcurr
entassets;
therel
ati
onswi t
htheshort-
ter
m credi
tors.