Research work

The role of financial management

The main themes

FINAL TEST

Studies

ESTIMATING

Literature

FINANCIAL MANAGEMENT

1. Van Horne, James C. Fundamentals of financial management.- 11ed.
2. C.Tracy, John A.Tracy,CPA Small Business Financial Management, Wiley Publishing, Inc.
3. Jim and Patty Rouse Sound Financial Management
4. Гридчина М. В. Финансовый менеджмент: Курс лекций. — 3-е изд., стереотип. —К.: МАУП, 2004. — 160 с.: ил. — Библиогр.: с. 155–156.

1 mark – attendance= 15

2 marks- participation in discussions=30

5 marks – personal research=5

SUM=50

100% test = 45 marks

80% test = 40 marks

70% test= 35 marks

60% test = 30 marks

50% test = 25 marks

MAX SUM= 100

1. The role of financial management
2. The business? Tax and financial environment
3. The time value of money
4. The valuation of long-term securities
5. Risk and return
6. Financial statement analysis
7. Funds analysis, Cash-flow analysis, Financial planning
8. Cash and marketable security management
9. Accounts receivable and inventory management
10. Short-term financing
11. Capital budgeting and estimating cash flow
12. Capital budgeting techniques
13. risk and managerial options in capital budgeting
14. Required returns and he cost of capital
15. Operating and financial leverage
16. Capital structure determination
17. Dividend policy
18. The capital market
19. Long term debt, preferred stock and common stock
20. Term loans and Leases
21. Convertibles, exchangeables, warrants
22. mergers and other forms of corporate restructuring
23. International financial management

1. Financial management definitions
2. The goal of the firm
3. Organization of financial management function in crisis situations
4. Organization of a book

1. The financial environment: financial markets (money and capital, primary and secondary) Europe and Ukraine practice

2. The financial environment: Financial intermediaries (deposit institutions, insurance companies, pension funds, financial brokers) Europe and Ukraine practice

1. Financial management definitions

The financial managers play a dynamic role in modern company’s development. This has not always been the case. Earlier In the first half of 1990^th financial managers only raised funds and managed their firm’s cash position? In 1950^th the increasing acceptance of present value concepts encourage financial managers to expand their responsibilities and to become concerned with selection of capital investment projects. Today external factors have an increasing impact on the financial managers: heightened corporate competition, technological change, volatility in inflation and interest rates, worldwide economic uncertainty, tax law changes concerns over certain financial dealing and must be dealt with almost daily. So The ability of a financial manager to adapt to change, raise funds, invest in assets and manage wisely will affect to firm’s success. Thus the financial manager through efficiency acquiring, financing and managing assets contributes to the firm to the vitality and growth of the economy as a whole.

Financial management means properly recording all of the monetary (and some nonmonetary) transactions of your organization. Financial management also means reporting those transactions in standard forms that show the financial position and performance of your organization. And financial management means ensuring that the organization’s funds are safeguarded and used prudently, now and in the future. It involves accounting, information management and planning. You must secure the funds you need to operate, record the activities of your operation, analyze the results on an ongoing basis and report on your activities and financial position. And you must repeat the process month after month and year after year.

Financial transactions are recorded in categories or accounts that describe the assets, liabilities, revenues and expenses of your operation. This listing of accounts and their identifying code numbers is called the chart of accounts. It is relatively standard for most businesses, but your chart of accounts should reflect the nature of your business. You may have a series of accounts for recording the expenses related to property management, for example, such as grounds maintenance and laundry expenses. A business of a different sort — manufacturing or retail — would omit these accounts but include others. Using the identifying codes from the chart of accounts, financial transactions are recorded in journals, which are characterized by transaction type. You should have the following journals, which make up your official records:

Cash Receipts Log to record cash coming in and deposited in the bank

Payment Records to record cash payments to others (checkbook)

Payroll Register to record all payroll activities (gross pay, taxes withheld)

General Journal to record transactions outside the other categories (adjustments to balances, transfers between accounts)

The information from the journals is posted —recorded in summary or detail — to the general ledger(GL). The GL is the comprehensive record of all transactions for the organization.

Financial transactions resulting from day-to-day activity are recorded as journal entries. All transactions are recorded chronologically in the general ledger. Later, the same information is recorded again, but this time it is grouped into account categories such as office supplies expense, cash or accounts payable. Office supplies expense transactions are recorded on one standard account form, and cash transactions are recorded on another. (Account categories

are defined in the chart of accounts.) There are at least two sides to every journal entry — a debit and a credit. In the language o f accounting, “debit” and “credit” do not refer to “decreasing” and “increasing” but rather to position sin the journal — the left and right side, respectively. Each transaction affects at least two accounts and will re q u i re a credit entry and an equal debit entry.

The principles of accounting define whether a given transaction should be recorded as a debit or a credit, and those principles are not obvious to the uninitiated. Transactions are recorded primarily in the following four account categories:

Assets are the “things” that an entity owns or has a right to claim (receivables) or use in the course of operations. They include cash, equipment, investments and inventory. Assets can be tangible (such as property) or intangible (such as patents).

Liabilities are obligations or debts that the entity owes to creditors, customers or other third parties. Liabilities may include accounts payable to vendors, loans from banks and security deposits from tenants.

Revenues are inflows of cash or other assets usually as a result of the delivery of services or fund-raising activities. Re venue, also called income, includes grants, donations, program fees, proceeds from the sale of property and rental income. Expenses are outflows of cash or other assets as a result of the delivery of services or other activities in the course of normal operations. Expenses include staff payroll, program expenditures, property management costs and overhead.

When all transactions have been recorded for a particular period (a month, a quarter), the balances for each account are summarized into standard reports, such as the following:

Trial Balance is a listing of the chart of accounts with a balance for each account. This report shows that the books are in balance — debits equal credits.

Balance Sheet (or Statement of Financial Position) is a report of the financial position of the organization for a moment in time showing the assets, liabilities and net assets (difference between what is owned and what is owed).

Income Statement (or Statement of Activity) is a report of the financial performance of the organization for a period of time (month, year) showing the revenues, expenses and resulting difference (net income or loss).

Statement of Cash Flows is a report of cash activity for a period of time (in the past) showing the cash inflows and outflows from operations, financing and investing.

Statement of Functional Activities is a report showing a breakdown of expenses by functional area (such as development, management or administration) or by program (such as housing services or food bank).

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