MGTA02H3 Chapter 12: Financial Decisions
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MGTA02H3 Full Course Notes
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Document Summary
Finance (corporate finance): the business function involving decisions about a firm"s long term investments and obtaining the funds to pay for those investments typically involves four responsibilities: determining a firm"s long term investments, obtaining funds to pay for those investments, conducting the firm"s everyday financial activities, helping to manage the risks that the firm takes. Financial managers: collect funds, pay debts, establish trade credit, obtain loans, control cash balances, and plan for future financial needs, overall objective to increase firm"s value, must ensure earnings exceed costs, cash flow management: managing the pattern in which cash flows into the firm in the form of revenues and out of the firm in the form of debt payment. Inventories: accounts receivables (minus accounts payable) large companies devout 20 cents of every sales dollar to working capital reducing this sum, every dollar that is not tied up in wc becomes a dollar of more useful cash flow, reduction of wc raises earnings permanently.
