Objectifs du financement et du management - commentaire en anglais

Financial MNGT deals with 2 activities:

• Raising money

• Managing a company’s finances in a way that achieves the highest rate of return.

INTRODUCTION TO FINANCIAL MANAGEMENT

 Money comes from external sources (investors/lenders) or is internally generated through earnings.

 It is important for a firm to have a solid grasp of how it is doing financially.

 Entrepreneurs must be aware of how much money they have in the bank and if that amount is sufficient to satisfy their firm’s financial obligations.

 It is important for a firm to anticipate whether it will be able to fund its growth through earnings or if it will need to look for investment capital or borrowing to raise needed cash.

Financial Objectives of a Firm

Four main financial objectives:

• Profitability: ability to earn a profit. A firm must become profitable to remain viable and provide a return to its owners.

• Liquidity: company’s ability to meet its short-term financial obligations. It is often a challenge to keep enough money in the bank to meet its routine obligations.

• Efficiency: how productively a firm utilizes its assets relative to its revenue and its profits. (see turnaround time)

• Stability: the strength and vigor of the firm’s overall financial posture. To be stable, a firm must not only earn a profit and remain liquid but also keep its debt in check.

 Debt-to-equity ratio : LT debt/ shareholder’s equity : has to be low.

Small companies improve their prospects by joining buying groups or co-ops to attain volume discounts on products and services.

The Process of Financial MNGT

To assess whether its financial objectives are being met, firms rely on analyses of financial statements, forecasts and budgets:

• Financial statement: written report that quantitatively describes a firm’s financial health.

 Balance sheet, income statement, statement of cash flows

• Forecasts: an estimate of a firm’s future income and expenses, based on its past performance, its current circumstances, and its future plans.

• Budgets: itemized forecasts of a company’s income, expenses, and capital needs and are also an important tool for financial planning and control.

 Process of a firm’s financial management:

STEP 1: the statements organize and report the firm’s financial transactions.

 Tell a firm how much money it is making or losing (income statement)

 Tell a firm the structure of its assets and liabilities (balance sheet)

 Tell a firm where its cash is coming from and going (statement of cash flows)

Also help a firm discern how it stacks up against its competitors and industry norms.

STEP 2: Forecasts are used to prepare a firm’s pro forma financial statements which constitute its financial plan.

STEP 3: Use of financial ratios:

- To discern whether a firm is meeting its financial objectives

- To assess trends.

- To discern how it stacks up against its industry peers.

FINANCIAL STATEMENTS AND FORECASTS

Historical financial statements :

• Past performance

• Prepared on a quaterly and annual basis

• Publicly traded firms are required by the Securities and Exchange Commission to make financial statements available to the public => required filling as 10-K which is a report similar to the annual report except that it contains more detailed information about the company’s business.

Pro forma financial statements:

• Projections for future periods

• Based on forecasts

• Completed for 2/3 years in the future

Historical Financial Statements

If a firm goes to a banker or investor to raise funds, the banker or investor will invariably ask for copies of past financial statements.

 Income statements: reflects the result of the operations of a firm over a specified period of time.

Record all the revenues and expenses for the given period and shows whether the firm is making a profit or is experiencing a loss

Help project future sales and earnings

• Net Sales: total sales – allowances for returned goods and discounts

• Cost of sales: all the direct costs associated with producing or delivering a product or service, including the material costs and direct labor.

• Operating expenses: Expenses not directly related to producing a product or service: MKT, administrative costs…

Managers compare the ratios of cost of sales and operating expenses to net sales for different periods.

• Profit margin (or return on sales): net income/net sales

...