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Chapter 16: Mastering Financial Management
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 16 | Slide 1
Learning Objectives
1. Explain the need for financial management
2.
3.
4.
5.
6.
in business.
Summarize the process of planning for
financial management.
Identify the services provided by banks and
financial institutions for their business customers.
Describe the advantages and disadvantages of
different methods of short-term debt financing.
Evaluate the advantages and disadvantages
of equity financing.
Evaluate the advantages and disadvantages
of long-term debt financing.
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 16 | Slide 2
What Is Financial Management?

The Need for Financing
1. Short-Term Financing
2. Long-Term Financing
 The Need for Financial Management
1. Financial Management During the
Economic Crisis
2. Financial Reform After the Economic Crisis
3. The Risk-Return Ratio
 Careers in Finance
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 16 | Slide 3
Planning—The Basis of Sound Financial
Management

Developing the Financial Plan
1. Establishing Organizational Goals
2. Budgeting for Financial Needs
3. Identifying Sources of Funds
 Monitoring and Evaluating Financial
Performance
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 16 | Slide 4
Financial Services Provided by Banks
and Other Financial Institutions

Traditional Banking Services for Business
Clients
1. Savings and Checking Accounts
2. Business Loans
 Why Has the Use of Credit Transactions
Increased?
 Electronic Banking Services
 International Banking Services
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 16 | Slide 5
Sources of Short-Term Debt Financing

Sources of Unsecured Short-Term Financing
1. Trade Credit
2. Promissory Notes Issued to Suppliers
3. Unsecured Bank Loans
4. Commercial Paper
 Sources of Secured Short-Term Financing
1. Loans Secured by Inventory
2. Loans Secured by Receivables
 Factoring Accounts Receivable
 Cost Comparisons
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 16 | Slide 6
Sources of Equity Financing

Selling Stock
1. Initial Public Offering and the Primary
Market
2. The Secondary Market
3. Common Stock
4. Preferred Stock
 Retained Earnings
 Venture Capital and Private Placements
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 16 | Slide 7
Sources of Long-Term Debt Financing

Long-Term Loans
1. Term-Loan Agreements
2. The Basics of Getting a Loan
 Corporate Bonds
1. Types of Bonds
2. Repayment Provisions for Corporate Bonds
 Cost Comparisons
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 16 | Slide 8