What Is Financial Management? All the activities concerned with obtaining money and using it effectively Determining the best ways to raise money Ensuring money is used in keeping with the organization’s goals Planning The need for financing When expenses are high or sales are low Opportunities to expand Copyright © Cengage Learning. All rights reserved

The Need for Financing Short-term financing Long-term financing Money that will be used for one year or less Cash flow—the movement of money into and out of an organization Inventory—speculative production (the time lag between the actual production of goods and when the goods are sold) Long-term financing Money that will be used for longer than one year Often involves large amounts of money Copyright © Cengage Learning. All rights reserved

Cash Flow for a Manufacturing Business Copyright © Cengage Learning. All rights reserved

Comparison of Short- and Long-Term Financing Copyright © Cengage Learning. All rights reserved

The Need for Financial Management Risk-return ratio Based on the principle that a high-risk decision should generate higher financial returns for a business and more conservative decisions often generate lesser returns Proper financial management can ensure that Financing priorities are in line with organizational goals and objectives Spending is planned and controlled Sufficient financing is available when it is needed Credit customers pay on time and delinquencies are reduced Bills are paid promptly Taxes are paid in a timely manner Excess cash is invested in interest-bearing securities Copyright © Cengage Learning. All rights reserved

Careers in Finance Skills and traits of successful financial managers Responsible and honest Strong background in accounting or math Knowledge of how to use a computer to analyze data Expert in written and oral communications Jobs Bank officer Credit officer Financial analyst Financial planner Insurance analyst Investment account executive Copyright © Cengage Learning. All rights reserved