8. Finance Managers
Determine current
Measure and
and future ability to
monitor ongoing
meet financial
operations.
obligations.
Prepare estimates and
forecasts for future sources
and uses of funds.
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9. Financial Controls
Financial
Statements
Ratio Analysis Audits
Responsibility
Centers
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10. The Equation that
Describes a Balance Sheet
Assets = Liabilities + Stockholders’ Equity
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11. Assets Fall Into
One of Two Categories
1. Current assets are 2. Fixed assets are assets
cash or items that are not intended for sale
normally converted or conversion to cash.
into cash within one Fixed assets include
year from the date of land, buildings, and
the balance sheet. equipment.
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12. Liabilities
Current and Long-Term Debts
Current liabilities are debts
Current liabilities are debts
due and payable within one
due and payable within one
year of the date of the balance
year of the date of the balance
sheet.
sheet.
Long-term liabilities are those
Long-term liabilities are those
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14. Income Statement
Seven Categories
Net sales
Costs of goods sold
Gross profit
Operating expenses
Net income (or loss) before taxes
Taxes
Net income, the profit left after paying taxes
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15. Financial Audits
• Internal Audits
– Keep problems in-house.
– Are likely to be conducted by people who know operations well.
– May lack objectivity.
– May also lack the power to penetrate cover-ups.
• External Audits
– An independent public accounting firm conducts an external
audit.
– Federal regulations require publicly traded companies to
conduct certified external audits each year.
– Enhances creditability.
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16. Budgets Serve Managers
in Four Important Ways
1. They expedite allocation and coordination of
resources for programs and projects.
2. They operate as a powerful monitoring system
when supplemented with periodic budget updates.
3. They provide rigorous control guidelines for
managers by setting limits on expenditures.
4. They facilitate evaluation of individual and
department performance.
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17. Five Budget Considerations
Adjusting and pricing
Identifyinggoals, plans, to
Planning and schedulingand
Setting goals
Locating needed funds
resources to match actual
resources
reach the goals
fund availability.
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18. Budgets
Four Standardized Approaches (1 of 4)
Top-Down Budgeting
Senior managers prepare budgets and distribute
them to lower levels, with or without input from
below.
This method may plan and control without
cooperation and knowledge of subordinates.
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19. Budgets
Four Standardized Approaches (2 of 4)
Bottom-Up Budgeting
Taps the knowledge and experiences of all
organization members.
Those closest to the planned activities contribute
to building the budget that affects them.
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20. Budgets
Four Standardized Approaches (3 of 4)
Zero-Based Budgeting
Eliminates complacency.
Must justify every dollar requested in light of
strategic plans and goals.
Must list the costs of all resources.
Must choose priorities and create alternatives for
accomplishing the unit’s part in the overall strategic
plan.
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21. Budgets
Four Standardized Approaches (4 of 4)
Flexible Budgeting
Levels of expense are correlated with specified
output levels.
Sets “meet or beat” standards with which
expenditures can be compared.
Unit expenses within budgeted amounts are
usually permitted.
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22. Financial Budgets
Cash Budgets project the amount of cash that will flow
into and out of an organization and its subsystems during
a fixed period.
Capital Expenditure Budgets project the short- and
long-term funding needed to acquire capital goods.
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23. Marketing Umbrella
Product design Distribution
Packaging Customer service
Pricing Sales
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24. Marketing Control Techniques
Market Test Marketing
research marketing ratios
Sales quotas Stockage
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25. Marketing Research
. A feedforward control technique
Consists of gathering and analyzing
. geographic, demographic, and
psychographic data
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26. Test Marketing–Four Points
1. Introduce it to a limited market on a small scale to assess its
acceptance.
2. Disadvantage of extensive test marketing is that it can tip a
company’s hand to competitors.
3. Planners analyze the results of testing to determine if the
company should proceed with manufacturing, distribution, or
modifications.
4. Limits the risks a company faces when introducing something
new.
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27. Marketing Ratios
Frequently used measures include:
Frequently used measures include:
Ratio of profit to sales
Ratio of profit to sales
Costs of selling to gross profit
Costs of selling to gross profit
Sales calls to orders generated
Sales calls to orders generated
Profitability of each order
Profitability of each order
Changes in sales volume to price changes
Changes in sales volume to price changes
Ratio of bad debts to total credit granted
Ratio of bad debts to total credit granted
Sales volume to production capacity for the entire organization
Sales volume to production capacity for the entire organization
Market share
Market share
Order turnaround time
Order turnaround time
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28. Stockage
Level of inventory.
Money tied up in inventories is
unavailable for other uses.
Must reduce the number of slow-moving
items or eliminate the items altogether.
Devote most of the best display areas to
items that yield the largest profits.
Tracking stockage levels, managers can:
Determine normal usage rates.
Maintain minimum levels.
Set efficient reorder points.
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