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Questions and Answers
What is the primary objective of Financial Management?
Which form of business organization is owned by one person and operated for his or her own profit?
According to Gitman and Zutter, how do they define Finance?
What does Finance involve?
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Which business organization is an entity created by law and owned by shareholders?
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What does Financial Management aim to maximize?
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What is the primary goal of financial management according to Cabrera (2017)?
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In a small business, who often assumes direct responsibility for marketing, production, finance, and other functions?
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What are the three major types of financial decisions made by the Finance Manager?
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What is the role of the Chief Financial Officer in very large concerns?
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What are the types of decisions determined by financing decisions?
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What is the primary responsibility of the Finance Manager in medium-size business concerns?
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What does an investment decision aim at?
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Who is usually one of the senior officers of the firm reporting directly to the President or Executive Vice President or Chief Operating Officer?
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What is the title often held by the officer responsible for the broader financial area in very large concerns?
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What are the key functional areas where responsibilities are often divided between a treasurer and a controller in some business firms?
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Financial management is primarily concerned with acquiring funds and utilizing them to achieve the firm's desired goals.
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The goal of financial management is to minimize the wealth of the shareholders.
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In a small business, the head of the firm often assumes direct responsibility for marketing, production, finance, and other functions.
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In medium-size business concerns, a separate department headed by an officer with the title as Finance Manager may be assigned primary responsibility for the narrower funds supply aspects of the finance function.
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The chief finance officer usually reports directly to the Chief Operating Officer in very large concerns.
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Investment decisions aim at committing limited resources to projects that are expected to earn a return greater than a minimum acceptable return.
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Financing decisions determine how scarce resources are committed to projects.
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The mix of debt and equity is determined by operating decisions.
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The investment decisions should aim at investments in assets only when they are expected to earn a return greater than a minimum acceptable return.
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The primary goal of financial management is to maximize the wealth of the shareholders.
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Finance is only concerned with managing money and does not involve raising resources or allocating them.
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Financial management involves decisions that aim to maximize the value of shareholders' wealth.
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A partnership is a business owned by one person and operated for his or her own profit.
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A corporation is an entity created by law and owned by shareholders.
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The primary goal of financial management is to maximize the value of stakeholders' wealth.
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Financial management includes the study of investment and institutions and markets.
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Study Notes
Financial Management Objectives
- Primary objective is to acquire funds and utilize them to achieve the firm's goals.
- Aims to maximize shareholder wealth, contrary to minimizing it.
Forms of Business Organization
- Sole proprietorship: Owned and operated by one individual for personal profit.
- Corporation: Legal entity owned by shareholders.
Definition and Scope of Finance
- Finance defined as managing money, focusing on investment and markets, rather than just raising and allocating resources.
- Involves making strategic decisions to maximize the value of shareholders' wealth.
Business Responsibilities
- In small businesses, the owner typically oversees all functions: marketing, production, finance, etc.
- In medium-sized firms, a Finance Manager may handle narrower aspects of financial management.
- Chief Financial Officer (CFO) in large firms reports directly to the Chief Operating Officer (COO).
Types of Financial Decisions
- Major financial decisions include investment, financing, and operational decisions.
- Investment decisions focus on committing resources to projects with expected returns exceeding a minimum acceptable rate.
- Financing decisions influence how resources are allocated, determining the mix of debt and equity.
- Operational decisions detail the management of the firm’s daily activities.
Finance Manager Responsibilities
- In medium-sized businesses, the Finance Manager primarily addresses the firm’s funding processes.
- Their goal aligns with maximizing shareholder wealth through effective financial strategies.
Senior Financial Roles
- The CFO, as a senior officer, plays a pivotal role in financial management and strategic planning within large firms.
- The specific titles and responsibilities often vary between the Treasurer (focused on funding and investment) and Controller (focused on financial reporting and compliance).
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Description
Test your knowledge of the basic concepts and principles of financial management including overview, roles of finance manager, financial environment, and flow of funds in a business enterprise.
