Collins 10

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ManagingManagingFinancial ResourcesFinancial Resources

Chapter 10Chapter 10

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ter Objectives

1.1. Identify functions of money and governmentIdentify functions of money and governmentmeasures of money supplymeasures of money supply

2.2. Distinguish types of financial institutions,Distinguish types of financial institutions,their services/roles in money supplytheir services/roles in money supply

3.3. Identify the goals of Federal Reserve andIdentify the goals of Federal Reserve andexplain its policiesexplain its policies

4.4. Explain how a new business gets start-upExplain how a new business gets start-upcash and ways existing companies financecash and ways existing companies financeoperations and growthoperations and growth

5.5. Show how securities market operates and isShow how securities market operates and isregulatedregulated

6.6. Understand market performance measuresUnderstand market performance measuresand equity/debt financingand equity/debt financing

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sFunctions Of MoneyFunctions Of Money

BarteringBartering

MoneyMoney

Medium OfMedium Of

ExchangeExchange

MeasureMeasureOf ValueOf Value

Store OfStore OfValueValue

Trade StuffTrade Stuff

For StuffFor Stuff

Difficult ToDifficult ToDetermine ValueDetermine Value

Stuff CannotStuff Cannot

Always Be SavedAlways Be Saved

Easily AcceptableEasily AcceptableDivisibleDivisiblePortablePortableDurableDurable

Easy ToEasy ToState PriceState Price

Keeps ValueKeeps Value

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sMoney SupplyMoney

Supply

M1M1

Federal Reserve Board WebsiteFederal Reserve Board Website

Census Population ClockCensus Population Clock

M2M2

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sDepository InstitutionsDepos

itory Institutions

Commercial BanksCommercial Banks

Savings BanksSavings Banks

Credit UnionsCredit Unions

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NondepositoryNondep

ository

InstitutionsInstitutionsFinance CompaniesFinance Companies

InsuranceInsurance

CompaniesCompanies

Brokerage FirmsBrokerage Firms

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sFinancial ServicesFinancial ServicesChecking/Savings AccountsChecking/Savings Accounts

ATMsATMs

Credit/Debit CardsCredit/Debit Cards

LoansLoans

Financial AdviceFinancial Advice

Sells Financial ProductsSells Financial ProductsInsuranceInsurance

Electronic BankingElectronic Banking

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sBank RegulationBank Regulation

Federal Depository InsuranceFederal Depository Insurance

CorporationCorporation

19331933

Insures DepositsInsures Deposits

Periodic ExaminationsPeriodic Examinations

Office of Thrift SupervisionOffice of Thrift SupervisionNational Credit UnionNational Credit Union

AdministrationAdministration

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s Money MultiplierMoney Multiplier

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sFederal Reserve SystemFederal Reserve System

Central Banking (1913)Central Banking (1913)

12 Districts/12 Districts/

BanksBanks

Board of GovernorsBoard of Governors

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sTools Of The FedTools Of The Fed

GoalsGoalsPrice StabilityPrice StabilitySustainable EconomicSustainable Economic

GrowthGrowthFull EmploymentFull Employment

Tools

$Reserve Requirements$Discount Rate$Open Market Operations

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sFederal Funds RateFederal Funds Rate

%Federal FundsFederal Funds(Discount Rate)(Discount Rate)

%Prime RatePrime Rate

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Bankers Bank &Bankers Bank &Governments BankerGovernments Banker

Check ClearingCheck Clearing

U.S. TreasurysU.S. TreasurysChecking AccountChecking Account

Paperwork inPaperwork inGovernment SecuritiesGovernment Securities

Collect Federal Tax PaymentsCollect Federal Tax Payments

Lender to GovernmentLender to Government

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sFinancial ManagerFinancial Manager

finance is all of the activitiesfinance is all of the activitiesinvolved in planning for, obtaining,involved in planning for, obtaining,and managing a companys funds.and managing a companys funds.

financial manager determines howmuch money the company needs,

how and where it will get thenecessary funds, and how and when

it will repay the money

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Developing ADeveloping AFinancial PlanFinancial Plan

Estimating SalesEstimating Sales

Getting The MoneyGetting The Money

Personal AssetsPersonal Assets LoansFamily/FriendsLoansFamily/Friends

Bank LoansBank Loans

Making The FinancingMaking The FinancingDecisionDecision

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Where SmallWhere SmallBusinesses Get FundingBusinesses Get Funding

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Loan CharacteristicsLoan Characteristics

MaturityMaturity Short-TermShort-Term IntermediateIntermediate Long-TermLong-Term Line of CreditLine of Credit AmortizationAmortizationSecuritySecurity

CollateralCollateral UnsecuredUnsecuredInterestInterest

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sGrowth Stage FinancingGrowth Stage Financing

ManagingManaging

CashCash

Accounts ReceivableAccounts Receivable

Accounts PayableAccounts Payable

Trade CreditTrade Credit

BudgetingBudgeting

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Sources Of FinancingSources Of FinancingDuring Growth StageDuring Growth Stage

BankBank

AdditionalAdditional

OwnersOwners

Private InvestorsPrivate Investors

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AngelsAngels

VentureVenture

CapitalistsCapitalists

Going PublicGoing Public

Initial Public OfferingInitial Public Offering

Investment Banking FirmInvestment Banking Firm

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MarketsMarketsAnd ExchangesAnd Exchanges

MarketsMarkets

PrimaryPrimary

SecondarySecondary

Organized ExchangesOrganized Exchanges

New York Stock ExchangeNew York Stock Exchange

American Stock ExchangeAmerican Stock Exchange

Over-The-Counter (OTC)Over-The-Counter (OTC)

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RegulatingRegulatingSecurities MarketsSecurities Markets

Securities and ExchangeSecurities and ExchangeCommission (1934)Commission (1934) ProspectusProspectus

Insider TradingInsider TradingMarket IndexesMarket Indexes

Dow Jones Industrial AverageDow Jones Industrial Average NASDAQ CompositeNASDAQ Composite S & P 500S & P 500Reading A Stock ListingReading A Stock Listing

Bull vs. Bear MarketBull vs. Bear Market

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Stock ListingStock ListingFor Hershey FoodsFor Hershey Foods

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Interpreting AInterpreting AStock QuotationStock Quotation

Term Explanation52-Week HI Highest price in last year

52-Week LO Lowest price in last year

Stock (Symbol) Symbol of listing

DIV Annual dividend per share

YLD % D/E yield on closing price

PE Investors pay on $1 earnings

VOL Volume of shares traded

Close Price at close of business day

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Financing TheFinancing TheGoing ConcernGoing Concern

$

$

$

$$ Equity FinancingEquity Financing

$

$

$

$$

Debt FinancingDebt Financing

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sStockholders EquityStockholders Equity

Risk/Reward TradeoffRisk/Reward Tradeoff

DividendsDividends

Types of StockTypes of Stock CommonCommon PreferredPreferred

oCumulativeCumulativeoConvertibleConvertible

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debt securities that obligate thedebt securities that obligate the

issuer to make interest paymentsissuer to make interest payments

to bondholders and to repay theto bondholders and to repay the

principal when the bond matures.principal when the bond matures.

Treasury Bills/BondsTreasury Bills/BondsMunicipals (munis)Municipals (munis)

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sCareers In FinanceCareers In FinanceCommercial BankingCommercial Banking

Corporate FinanceCorporate Finance

Analyze Industry TrendsAnalyze Industry Trends

Evaluate Corporate InvestmentEvaluate Corporate Investment Financial PlanningFinancial Planning Evaluate AcquisitionsEvaluate Acquisitions

Review Top Managers NeedsReview Top Managers NeedsInvestment IndustryInvestment Industry

Graduate Education/CertificationGraduate Education/Certification