1. PowerPoint Presentations for Finance for Non-Financial Managers: Seventh Edition
Prepared by
Pierre Bergeron
University of Ottawa

2. Organization of Finance for Non-Financial Managers, 7e

3. Overview of Financial Management
CHAPTER 1
Overview of
Financial Management

4. Learning Objectives
Identify some of the external factors financial managers must consider to improve a company’s bottom line.
Discuss the role of financial management within a business.
Identify the people responsible for the finance function.
Explain the four financial objectives of a business.
Describe the three major types of business decisions.
Examine the issues related to corporate transparency and accountability.

5. How the external environment can impact on financial statements
LO 1
External Environment
How the external environment can impact on financial statements
Economic front
Political front
Global and open world economies
Technological changes
Product life cycle
Manufacturing side

6. The Changing Role of Financial Management
LO 1
The Statement of Financial Position
Today
Yesterday
Internal activities
• Working capital
• Capital budgeting
• Management information
systems
External activities
• Mergers
• Acquisitions
• Reorganization
• Recapitalization
Focus
• Economy
• Efficiency
• Effectiveness
Focus
Raising funds
Operating and financial matters
Legal matters

7. The Role of Financial Management
LO 2
Statement of Financial Position
Assets
Return on
assets
Investors
Cost of
financing
10% 7%
How are we doing and is the business profitable?
How much cash do we have on hand and can we pay our bills on time?
What should we spend our funds on? Operating activities or non-current assets?
Where will our funds come from? From internal operations? From lenders? From shareholders?
How will our investors’ interests be protected? How much will it cost?

8. People Responsible for Finance Management
LO 3

9. People Responsible for Finance Function
LO 3
People Responsible for Finance Function
CONTROLLER
TREASURER
General accounting
Cost accounting
Credit and collections
Management information systems
Trade and other payables
Corporate accounting
Internal auditing
Budgets and analysis
Systems and procedures
Planning and controlling
Interpreting financial reports
Evaluation and consultation
Preparing reports for government agencies
Reports on capital assets
Raising capital
Investor relations
Short-term borrowings
Dividends and interest payments
Insurance management
Analysis of investment securities
Retirement funds
Property funds
Property taxes
Investment portfolio
Cash flow requirements
Actuarial
Underwriting policy and manuals
Tax administration
All MANAGERS

10. Four Financial Objectives
Efficiency
R.O.R
R.O.A
R.O.I
R.O.E %
(Incubation)
Liquidity
Current assets $
Less: current liabilities $
Net working capital $
(Cash shortage: must rely on credit)
Growth
Revenue
Working capital
Non-current assets
Profit for the year
(Financial insolvency = inaction)
Stability
Equity %
Assets
Debt %
(Total insolvency: debt is out of proportion)

11. Return on Revenue Objective
LO 4
Non-current assets
$3,000 or
$0.03
Current assets
$2,000 or
$0.02
Internal use
(retained earnings)
$5,000 or
$0.05
External use
$3,000 or
$0.03
Return on revenue
$8,000 or
$0.08
Dividends
$2,000 or
$0.02
Debt reduction
$1,000 or
$0.01

12. Three Types of Business Decisions
LO 5
Three Types of Business Decisions
Statement of Financial Position
Investing decisions
Operating decisions
Financing decisions
Managers
Managers
CEO/CFO/Treasurer
Non-current assets
Current assets
Statement of Income
Revenue
Cost of sales
Gross profit
Operating expenses
Profit before taxes
Income tax expense
Profit for the year
Equity
• Share capital
• Retained earnings
Liabilities
Long-term
Short-term

13. Working Capital Management
LO 5
Operating Decisions
Working Capital Management
Inventories
Trade receivables
Trade and other payables
Cash
Statement of Financial Position
Demassing
Planned downsizing
Productivity indicators
Rewarding simplification
Cutting back useless activities
Rewarding quality work
Empowering workers
Zero-based budgeting
Statement of Income

14. The matching principle Sources and forms of financing
LO 5
Financing Decisions
The matching principle
Sources and forms of financing
Cost of borrowed funds
Financing mix

15. Capital Assets Research and development Expansions New plants
Investing Decisions
Capital Assets
Research and development
Expansions
New plants
Modernizations
Acquisitions

16. Corporate Transparency and Accountability
LO 6
Corporate Transparency and Accountability
Government Legislation
most recent Act, Sarbanes-Oxley (2002)
Corporate Governance
push towards transparency, integrity, and ethical behaviour
Corporate Culture
emphasis on shared values and beliefs
Global Accounting and Financial Statements
International Accounting Standards Committee (IASC), International Financial Reporting Interpretations Committee (IFRIC), and International Financial Reporting Standards (IFRS)