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Financial Management

The document discusses key skills and responsibilities for chief financial officers (CFOs). It shows that analytical thinking and strategic planning are the most important skills for CFOs, according to a survey. The document also outlines non-finance functions CFOs take on, such as business development and IT management. Finally, it provides an overview of financial management practices like budgeting, obtaining funds, and using leverage through bonds or equity financing.

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66 views

Financial Management

The document discusses key skills and responsibilities for chief financial officers (CFOs). It shows that analytical thinking and strategic planning are the most important skills for CFOs, according to a survey. The document also outlines non-finance functions CFOs take on, such as business development and IT management. Finally, it provides an overview of financial management practices like budgeting, obtaining funds, and using leverage through bonds or equity financing.

Uploaded by

api-3740348
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Chapter 10:

Financial
Management
Most Important
Skills Needed by CFOs
People Development 10%

Building Relationships 19%

Communication Skills 26%


Creativity 27%

Objectivity 38%

Leadership 51%

Strategic Planning 55%

Analytical Thinking 75%

0% 10% 20% 30% 40% 50% 60% 70% 80%


Source: CIO Enterprise

2
Non-Finance
Functions of CFOs
Business Development 60%
P & L Responsibility 53%
MIS 49%
Reengineering 39%
Revenue Growth 25%
HR & Admin. 18%
Other Skills 5%
Sales 2%
Marketing 1%

0% 10% 20% 30% 40% 50% 60% 70%


Source: CIO Enterprise

3
What Financial Managers Do
• Planning • Auditing
• Budgeting • Managing taxes
• Obtaining funds • Advising top
• Controlling funds management on
(fund management) financial matters
• Collecting funds
(credit management)

4
Uses of Excess Funds
• Expansion
• Marketable securities
• Treasury bills
• Commercial paper
• Certificates of deposit
• Asset purchases

5
Financial Planning Process

Forecast Cash Flow Budget Cash


Short-term & Long-term Needs
Uses Operating, Cash, &
Capital

Compare Results Control


Modify Forecasts & Differences Actual
Budgets vs. Projected Flows

6
Financing Daily
Operations- Cash Flows
Money Received from: Business Expenses:
(Cash In) (Cash Out)

• Credit Sales • Inventory Purchases


• Cash Sales • Payment on Loans
• Investment Income • Payment on Assets
• Salaries Payable
• Supplies
• Taxes
7
Ways to Cut Costs
• Slash travel, consulting, & entertainment budgets
• Un-bundle product service/mix, charge for things
once free
• Renegotiate purchasing contracts
• Form partnerships to share costs
• Put selected R&D, technology, etc. on hold
• Speed collections/slow payments
• Cut people outside core areas of production &
sales
8
Sources of Equity Financing
• Internal Sources
– Retained earnings
– Owner contributions
• External Sources
– Sale of partnerships
– Venture capital
– Public sale of stock

9
Venture Capital Investments
$120.0

$100.0
In Billions
$80.0

$60.0

$40.0

$20.0

$0.0
1998 1999 2000 2001 2002

Source: National Venture Capital Association


10
Number of
Venture Capital Deals
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
1998 1999 2000 2001 2002

Source: National Venture Capital Association


11
Making Use of Leverage
Leverage- Selling Bonds Equity- Sale of Stock
Common Stock $ 50,000 Common Stock $500,000
Bonds (@10%) $450,000 Bonds (@10%) 0
Funds Raised $500,000 Funds Raised $500,000
Earnings $ 125,000 Earnings $ 125,000
Less: Bond Interest $ 45,000
Total Earnings $ 80,000 Total Earnings $ 125,000

Return to Return to = $125,000 = 25%


= $80,000 = 160%
Stockholders $50,000 Stockholders $500,000

12

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