Basic Financial Management
Basic Financial Management
Basic Financial Management
1-3
Financial Institutions
• Companies that specialize in financial
matters
– Banks – commercial and investment, credit
unions, savings and loans
– Insurance companies
– Brokerage firms
• Job opportunities
1-4
International Finance
• An area of specialization within each of
the areas discussed so far
• May allow you to work in other countries
or at least travel on a regular basis
• Need to be familiar with exchange rates
and political risk
• Need to understand the customs of
other countries; speaking a foreign
language fluently is also helpful
1-5
Basic Areas Of Finance
INTERNATIONAL
DOMESTIC
Corporate Financial
Investments
Finance Institutions
1-6
Why Study Finance?
• Marketing
– Budgets, marketing research, marketing financial
products
• Accounting
– Accounting and finance function, preparation of
financial statements
• Management
– Strategic thinking, job performance, profitability
• Personal finance
– Budgeting, retirement planning, college planning,
day-to-day cash flow issues
1-7
Business Finance
• Some important questions that are
answered using finance
– What long-term investments should the firm
take on?
– Where will we get the long-term financing to
pay for the investments?
– How will we manage the everyday financial
activities of the firm?
1-8
Financial Manager
• Financial managers try to answer some, or
all, of these questions
• The top financial manager within a firm is
usually the Chief Financial Officer (CFO)
– Treasurer – oversees cash management, credit
management, capital expenditures, and financial
planning
– Controller – oversees taxes, cost accounting,
financial accounting, and data processing
1-9
Corporate Organization Chart
Figure 1.1
1-10
Financial Management
Decisions
• Capital budgeting
– What long-term investments or projects
should the business take on?
• Capital structure
– How should we pay for our assets?
– Should we use debt or equity?
• Working capital management
– How do we manage the day-to-day
finances of the firm?
END