Discuss the role of microfinance in promoting economic development in the country. Money functions as a vehicle to pay for purchases, save for the future, and build wealth. Gaining valuable experience while doing my . "Finance" is typically broken down into three broad categories: Public finance includes tax systems, government expenditures, budget procedures, stabilization policy and instruments, debt. Is it better to raise more equity capital from investors or take out loans from lenders? It's the same with your business. Identify methods to protect against identity theft. As the last step, they will reconcile their books once a month or quarter by comparing their transaction records to their business bank account records. In most cases, the accounts payable and receivable departments will utilize computer software to record transactions. Additionally, the person in this job is responsible for maintaining and nourishing the companys connection with its investors. Individuals and businesses pay for any number of purchases using cash, credit, checks, and debit forms of payment. The Relationship between the Balance Sheet and the Income Statement, Operating Cash Flow and Free Cash Flow to the Firm (FCFF), Ratios: Condensing Information into Smaller Pieces, Profitability Ratios and the DuPont Method, Time Value of Money I: Single Payment Value, Methods for Solving Time Value of Money Problems, Time Value of Money II: Equal Multiple Payments, Equal Payments with a Financial Calculator and Excel, Time Value of Money III: Unequal Multiple Payment Values, Unequal Payments Using a Financial Calculator or Microsoft Excel, Using Spreadsheets to Solve Bond Problems, Data Visualization and Graphical Displays, Use of R Statistical Analysis Tool for Regression Analysis, Using Excel to Make Company Investment Decisions, Calculating the Weighted Average Cost of Capital, Forecasting Cash Flow and Assessing the Value of Growth, Using Excel to Create the Long-Term Forecast, The Importance of Trade Credit and Working Capital in Planning, Using Excel to Create the Short-Term Plan, Risk Management and the Financial Manager. As you do so, keep in mind your attitude toward money and ask yourself if something is more important to spend money on now or to save for the future. This practice controls all the economic operations of an enterprise like utilisation of funds, procurement of funds, payment, accounting, risk assessment and . They utilize the accounting teams data and market indicators to anticipate how the organization will perform in the future. If cash is getting tight, the people in finance will make arrangements to use the firm's bank line of credit. The comptroller, or more commonly a controller, in a for-profit business relies heavily on a knowledge of accounting. As well as creating forecasts and budget plans, the strategic finance team must identify and mitigate risks, ensure that the business finances are protected by varying financing options, and communicate with investors and other stakeholders as needed in order to accomplish these tasks effectively. (explain the second part of this question in more detail). This requires thorough financial planning to examine the entire health of the organization and to set both short- and long-term objectives. and you must attribute OpenStax. As with many of the financial topics introduced in this chapter, these activities are valuable for individuals and businesses alike. A record summarizing the information relevant to a single item in the accounting equation is called an account. Discuss how to read and reconcile bank statements. Companies cannot operate without the benefits of financial analysis. information must be collected regarding external factors such as economic conditions, investment alternatives, and competition. DECA Inc. April 18, 2022 Business Finance You are to assume the role of a recently hired financial planner for About Us Microspect Photo Designs, a new small family-owned business that is a retailer and manufacturer. Discuss the role of public sector in Economic development. A cash flow statement itemizes how much cash you started with, what your projected cash expenditures are, and how and when you plan to receive cash. A basic principle in finance is that the higher the risk, the greater the return that is required. JUDGE ROLE-PLAY CHARACTERIZATION You are to assume the role of the senior vice president for GLADLY, a hotel chain that does business in the United States. As a senior management consultant and owner, he used his technical expertise to conduct an analysis of a company's operational, financial and business management issues. Currently half of these assets are financed with long-term debt at 5 percent and half with common stock having a par value of$10. They analyze financial data prepared by accountants, monitor the firms financial status, and prepare and implement financial plans. Explain forms of financial exchange. A companys ultimate success depends on how well it identifies and manages its risks. Good financial planning has a number of common features. The act requires that CEOs, financial officers, accountants, and auditors comply with regulations and procedures designed to ensure accurate representation of companies' financial positions. We are ceaselessly proving the best platform for leading companies, which aids indefinite progress while creating meaningful learning experiences for the visitors and invaluable brand awareness for the clients. SalesNumberofemployees:Weeklypayroll(52weeksperyear)MonthlypayrollNumberofpurchaserequisitionsperyearResidential$1,000,000300754,000Commercial$1,600,0001501603,500GovernmentContract$3,200,000200903,000. Roles Performed by Financial Institution #1 - Regulation of Monetary Supply #2 - Banking Services #3 - Insurance Services #4 - Capital Formation #5 - Investment Advice #6 - Brokerage services #7 - Pension Fund Services #8 - Trust Fund Services #9 - Financing the Small and Medium Scale Enterprises #10 - Act as A Government Agent for Economic Growth Property insurance is one common type of insurance, which covers loss or damage to buildings and equipment. The roles of the finance function in organisations 4. These plans form the basis for hiring employees, capital spending, raising capital, marketing campaigns and bonuses for management. Financial planning allows a firm to understand the past, present, and future funding needs and distributions required to satisfy all interested parties. Financial statements are vital for any organization regardless of the size or method of ownership. Record keeping and financial reporting make up a major part of finance in a firm. We recommend using a A current asset is cash or anything that can be converted into cash in a year. In addition, you may choose to use tax preparation software to guide you through the process on your own with a computer. What does finance do? This might involve determining the. Our mission is to improve educational access and learning for everyone. The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo Financial managers have a complex and challenging job. Firstly, reliable records of money transfers inside the firm must be kept ensuring both legal compliances as well as accurate financial reporting to stakeholders. Jun 2009 - Oct 20095 months. DECA organizations often host competitive events where students assume roles and role-play scenarios that simulate job-related situations. CBD Tinctures Are Hot, But Are They Good for Us. Controllers are concerned with payroll functions, accounts receivable, and accounts payable including taxes, inventory control, and any number of short-term asset and liability tracking and monitoring activities. Other sources of income might include tips, gifts, and interest earned on a bank account. An income statement is a summary of a business' income and expenses during a specific period of time. Lets explore these positions in further depth. The main goal of the financial manager is to maximize the value of the firm to its owners. A corporate bond is a corporation's written pledge to repay a specific amount of money, plus interest. The vice president of finance (VP-F) is an executive-level position and oversees the activities of the controller and treasurer. A business strategy describes what a business plans to do, while finance funds the activities needed to get there. In the short run, profits would be high because research and development is very expensive. Mutual savings banks specialize in savings accounts and mortgages. Risk management is a plan for protecting yourself and your property as well as reducing financial losses caused by perils, hazards, or negligence. The vice president of finance (VP-F) is an executive-level position and oversees the activities of the controller and treasurer. With every action, at least two accounts will change. Cash flow is monitored in and out of the organization; financial reports are generated, as well as financial strategies are developed for the business performance.. ), https://openstax.org/books/introduction-business/pages/1-introduction, https://openstax.org/books/introduction-business/pages/16-1-the-role-of-finance-and-the-financial-manager, Creative Commons Attribution 4.0 International License. A private companys value is the price at which it could be sold. a. Conduct additional research and discuss. (cash, credit, debit, electronic funds transfer, etc). An owner has concerns about the direction of interest rates, currency fluctuations, changes in commodity prices and risks that his customers will not pay their invoices. They work with the firms other department managers to determine how available funds will be used and how much money is needed. Documents to manage include bank statements, paystubs, ownership certificates, tax forms, etc. By recognizing these risks early, your firm will have the greatest potential opportunity to limit any negative impact on the business, as well as discover any possibilities that may come from the changing business scene. The CEO (judge) realizes the value of a well operating finance department, but needs to gain a better understanding of the roles and responsibilities of financial management personnel and has asked you to explain. As the Corning situation demonstrates, financial managers constantly strive for a balance between the opportunity for profit and the potential for loss. The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo After creating the strategic plan, the finances turn to the methods of funding a company's operations. Cash flow management. Thirdly, the corporate finance department also has additional responsibility for having enough short . The role of the finance function Larger businesses have functional areas with specific roles. A budget is a formal, written statement of expected revenue and expenses for a future period of time. This is called risk assumption. The difference between assets and liabilities equals the owners' equity. Budgeting should involve all departments within a firm to determine sources and uses of funds and required funding to meet department and firm objectives. This book uses the Assets are anything of monetary value that you own and are classified as current or fixed. Managing a business is risky, right? When using credit, avoid the temptation to buy more than you can afford. In all business settings finance is important because it allows us to plan for the future by enabling informed decisions to be made about how to allocate resources, where to spend, and where to save to reach the short, medium and long term goals of the business. Balance sheets are critical for demonstrating the sources and uses of funds for a firm. Financial information includes raw data, records, and reports. Last week she worked 43 hours. Finance is tasked with overseeing the money to ensure the companys success. Some roles within the finance department include: Accountant Analyst Finance manager Collection specialist CFO However, no matter how strong the budgeting process, actual events can change the timing and magnitude of expected cash flows. c. Why does the Residential Division have a larger service department charge than the other two divisions even though its sales are lower? What is the main goal of the financial manager? (Two students may be assigned to this question.) Identified challenges and opportunities while meeting with my managers to learn of their business process. Maximizing profits is one approach, but it should not be the only one. b. The role of a business is to produce and distribute goods and services to satisfy a public need or demand. All business decisions have financial consequences. Define and describe the characteristics of the following types of Business financing also requires managing taxes and credit. Liabilities are the amounts that a business owes and are classified as current or long-term. It's the job of financial managers to make sure the business has enough liquidity to pay its suppliers and employee on time. The Role of Finance in Business Every company has its finances at the center of its operations. Get the latest news, important notifications, weekly case study and more delivered in your inbox with DECA Direct Weekly. If there is an error, report it to your bank. They must give consumers privacy notices that explain the company's information-sharing practices. You will use the checkbook register to reconcile your bank statement when it comes. The chief responsibility of the VP-F is to create and mentor a sufficient and qualified staff that generates reports that are timely, accurate, and thorough. In short, any business must have money to function. Taxes are payments you make to the government for services they provide. Owners' equity (or net worth) is the amount of ownership interest in the business. You may also choose to hire a tax professional to complete your return. The Payroll Department had expenses of $75,400 and the Purchasing Department had expenses of$42,000 for the year. Next, add any recent deposits not on the statement to the reconciliation form. are not subject to the Creative Commons license and may not be reproduced without the prior and express written Balance sheets and financial statements are maintained by this sector of finance. Review your spending patterns and revise your goals as needed. How do finance and the financial manager affect the firms overall strategy? Financial managers handle a business's overall financial well-being. The financial analyst (participant) will present an analysis to you in a role-play to take place in your office. In fact, Corning recently announced plans to develop a separate company division for Gorilla Glass, which now has more than 20 percent of the phone marketwith over 200 million devices sold. Major part of finance in a year your bank statement when it comes Purchasing department had of... 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