7/26/2019 Chapter 12 Managing the Finance Function Ppt

CHAPTER 12:Managing the

Finance Function

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Managing the Finance

Function
  The etermination o& Fun# Reuirements

- &un#s &or speci+c reuirements
 1) to +nance #ai!" operations
 2) to +nance the +rm3s cre#it ser'ices
 4) to +nance the purchase o& in'entor"
 5) to +nance the ma(or assets

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Managing the Finance

Function
 For Financing ai!" operation
 - #a" to #a" operations o& a gi'en +rm
 - &or ta0ing care o& e6penses as it comes
 E6amp!es :

 Wages an# sa!aries, rent, ta6es, po$er !ight or some

mar0eting e6penses !i0e a#'ertising, tra'e!,
entertainment, printings etc) or some a#ministrati'e
e6penses !i0e au#iting !ega!, ser'ices

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Managing the Finance

Function
 For Financing Firm3s Cre#it 7er'ices
 - it is una'oi#a!e &or customers upon e6ten#ing cre#it

-their
i& a +rm +n#s #i/cu!t" in con'incing #istriutors to carr"
pro#ucts

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Managing the Finance

Function
 For Financing the Purchase o& In'entor"

 - to maintain a#euate in'entor" or the ra$ materia!s,

supp!ies an# parts are nee#e# to e 0ept in storage)
 - must ha'e su/cient &un#ing an# must e secure#

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Managing the Finance

Function
 For Financing the Purchase o& Ma(or Assets

 - use# $hen "ou a certain compan" nee#s e6pansion or

i& the" $ant to ma0e in'estment on capita! assets !i0e
!an#, p!ant, euipments

 - must ha'e !ong term sources

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Managing the Finance

Function
  The 7ources o& Fun#s

 - i& a +rm $i!! ha'e to ma0e use o& its cash in8o$s came
&rom 'arious sources :

 1) Cash sa!es
 2) Co!!ection o& Accounts Recie'a!es
 4) 9oans an# Cre#its
 5) 7a!es & assets
 ;) $nership Contriutions

 <) A#'ances &rom customers

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Managing the Finance

Function
 7hort term &un#s
 - are those repa"ment sche#u!es $ith !ess than 1 "ear)
 
7upp!ies o& short term &un#s

 1) tra#e cre#itors
 2) commercia! an0s
 4) commercia! paper houses
 5) +nance companies
 ;) &actors an# insurance companies

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Managing the Finance

Function
 9ong term sources o& &un#s
 - it has to tap !ong sources &un#s =necessar">

 1) !ong term #ets

 2) common stoc0s

 4) retaine# earnings

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Managing the Finance

Function
  The est source o& +nancing :
 As to 7cha!! an# Ha!e" recommen#s, &actors to e
consi#ere# are :

 A) F!e6ii!it"
 ) Ris0

 C) Income
 ) Contro!


E) Timing
 F) co!!atera! 'a!ues, 8oatation costs, spee#, e6posure

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Managing the Finance

Function
 Ris0 Management an# Insurance
 - ris0 is a 'er" important concept that e'er"o#" must
e &ami!iar $ith, ris0 re&ers to the uncertain !oss or in(ur"

 E6amp!es :

 Fire a# ets

  The&t #isa!it" an# #eath


F!oo# #amage c!aim &rom other parties

 Acci#ents

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Managing the Finance

Function
  T"pes o& Ris0s

 Pure- means there is no $a" o& ma0ing gains

 E6) The&t

 7pecu!ati'e- there is a chance o& !oss or gains

 E6) In'estments in common stoc0s

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Managing the Finance

Function

 Ris0 Management

- is an organi@e# strateg" &or protecting an# conser'ing assets an# peop!e

 - &or us to 0no$ $hat to #o upon ris0 occurances

 - to ha'e a choice on metho#s o& #ea!ing on it

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Managing the Finance Function

 Metho#s o& ea!ing $ith ris0

 1) The ris0 ma" e a'oi#e#

 2) the ris0 ma" e retaine#

 4) the ha@ar# ma" e re#uce#

 5) the !osses ma" e re#uce#

 ;) the ris0 ma" e shi&te#

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Managing the Finance

Function
   short term

o  9ong term
etermination
o  
& 
o  
Fun#s =process F!o$>
Reuirements

e.ecti'e
Procurement
& &un#s An# e/cient use

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