© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Financial Management and Banking

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter The Role of Financial Management Current needs Future needs –Sources of funds –Uses of funds –Maximizing company value

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Implementing the Financial Plan Monitoring cash flow –Accounts receivable and payable –Inventory control Managing cash reserves –Marketable securities –Electronic cash management

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Operating Budget Master budget –Cost control –Expenditures –Plan for the future –Financial control

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Capital Budget Process Request Review Evaluate recommend

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Financing Operations and Growth Length of term Cost of capital Debt or equity

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Length of Term Less than one year –Short-term financing Greater than on year –Long-term financing

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Long-Term Financing Internal sources –Retained earnings –Sale of assets External sources –Debt capital –Equity capital

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Cost of Capital Company risk Interest rates Opportunity cost

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Debt versus Equity CharacteristicDebtEquity MaturitySpecificNonspecific Claim on IncomeFixed CostDiscretionary Cost Claim on AssetsPriorityResidual Influence Over Management LittleVariable

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Types of Debt Financing Trade credit Commercial paper Secured loans Unsecured loans Leases Bonds

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter The U.S. Financial System Deposit  Commercial banks  Savings and loans  Mutual savings banks  Credit unions Nondeposit  Insurance companies  Pension funds  Finance companies  Brokerage firms

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Financial Services Checking and savings accounts Business and consumer loans Credit, debit, and smart cards Electronic banking

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Checking and Savings Accounts Demand deposits Statement savings Money market and CDs

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Business Loans Expansion Construction Purchases Renovation

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Short-Term Credit Credit cards Debit cards Smart cards

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Electronic Banking Automated teller Electronic funds transfer Online banking

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Evolving U.S. Banking Environment Repeal of the Glass-Steagall Act Emergence of financial supermarkets Breaches in the “Chinese Wall” Resurgence of community banks Struggling Internet banks

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Repeal of Glass-Steagall Financial Services Modernization Act 1999 –Financial institutions –Brokerage firms –Insurance companies

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Financial Supermarkets Financial institutions Securities firms

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Breaches in the Chinese Wall Research functions Lending functions Stock brokering Investment banking

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Community Banks Target markets Flexibility Personal service

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Struggling Internet Banks Customer service problems High expenses Negative cash flow

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Bank Safety and Regulation Federal Deposit Insurance Corporation Savings and Loan Association National Credit Union Association State Banking Commission Federal Reserve System Comptroller of the Currency

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Functions of the Federal Reserve Influencing U.S. money supply Supplying currency Clearing checks

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter What is Money? Medium of exchange Measure of value Store of value

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter U.S. Money Supply Hard Currency Demand deposits Time deposits

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Influencing the Money Supply Reserve requirements Discount rate Open-market operations Selective credit controls

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Federal Reserve Functions Supplying currency Clearing checks