International contemporay business chapter18

>>>>>>>> Chapter 18 Financing and Investing Through Securities Markets g n i n r a Le Goals Define finance, and explain the role of financial managers Identify sources of short-term financing for business operations Describe the components of a financial plan and the financial planning process Discuss long-term financing options Describe mergers, acquisitions, buyouts, and divestitures Outline how organizations manage their assets Compare the two major sources of funds for a business, and explain the concept of leverage s s e n i s The Bu f o n o i t Func e c n a n i F • Finance – planning, obtaining, and managing the company’s funds in order to accomplish its objectives – Maximizing overall worth – Meeting expenses – Investing in assets – Increasing profits to shareholders e h t f o The Role r e g a n a M Finance • Implement the firm’s financial plan • Determine the most appropriate source of funds • Many CFOs are members of the board of directors e d a r T n r u t e Risk-R of The process of maximizing the wealth of the firm’s shareholders by striking the optimal balance between risk and return l a i c n a Fin g n i n n P la • • Financial Plan – the inflows and outflows and sources of funds Financial plans are built by answering the following questions: 1) What funds will the firm require during the planning period? 2) When will it need additional funds? 3) Where will it obtain the necessary funds? • Financial plans are based on the forecasts of costs and expected sales activities for a given period s t e s s A g n i g a n Ma Sound Soundfinancial financialmanagement managementrequires requiresassets assetsto tobe be managed managedand andacquired acquired   What What aa firm firm owns owns   Use Use of of funds funds m r e t t r Sho Assets  Cash  Marketable Securities  Accounts Receivable  Inventory Capital t n e m t Inves s i s y l a An • Long-lived assets • Produce economic benefit for more than one year • Substantial investments • Capital Investment Analysis – Expansion: new assets – Replacement: upgrading assets g n i g a n Ma l a n o i t a Intern As s e t s • Today’s firms have facilities and assets worldwide • Sales occur outside of the home country • International Assets require the management of activities to reduce the financial risk of exchange rates s d n u F f o s e c r u o S l a t i p a and C e r u t c u r t S Debt Capital –funds obtained through borrowing Equity Capital – investment in the firm in exchange for ownership d n a e g a Lever e r u t c u r t S l a t i p Ca s n o i s i c De Goal: increasing the rate of return on funds invested by borrowing funds m r e T t r o h S g n i Mix m r e T g n and Lo Funds • Short-term funds – Current liabilities – Less expensive – Volatile interest rates • Long-term funds – Long-term debt and equity – Used for long-term assets y c i l o P d n e d i v i D • Dividends are cash payments to shareholders • Financial Managers must make decisions regarding their dividend policy – Should we pay a dividend? – When should it be paid? m r e t t r Sh o s n o i t p O g n i d Fun   Trade TradeCredit Credit   Short-term Short-termLoans Loans   Commercial CommercialPaper Paper g n o L f o s e c r So u g n i c n a n Term Fi  Public Sale of Stocks and Bonds  Private Placements  Venture Capitalists  Private Equity Funds  Hedge Funds , s n o i t i s i u q c A , s r Merge d n a s t u B uy o s e r u t i t s e D iv Financial managers evaluate mergers, acquisitions, and other opportunities – Leveraged buyouts – Divestiture • Sell-off/Spin-off ... finance, and explain the role of financial managers Identify sources of short-term financing for business operations Describe the components of a financial plan and the financial planning process... divestitures Outline how organizations manage their assets Compare the two major sources of funds for a business, and explain the concept of leverage s s e n i s The Bu f o n o i t Func e c n a n i F... Today’s firms have facilities and assets worldwide • Sales occur outside of the home country • International Assets require the management of activities to reduce the financial risk of exchange