1. VKSF 423 System Administration III Finance for NSA Managers

2. Announcements Practical Exam Practical Checklist Make appt. with either Mitch or myself by group All groups must be done by the end of week 10. Final exam Wednesday 5/12 in class Review 5/10 in class I will post all the notes I can get to the course conference

3. Syllabus Modifications Old Component WeightNew Component Due date Labs25%No changeAll sign offs and submission by the end of 10 th week Practical25%No changeDemonstrated before exam week begins Group Presentation 10%In labIn lab approximately 5 minutes Group Report 10%Site BookDue by end of 10 th week Homework10%Group Evaluation How did the individuals contribute to the completion of the labs Final Exam20%No changeDuring the final exam period

4. Finance for NSA Managers Organizational context What are your financial responsibilities? What does your organization do? Are you a profit center? Are you a cost center? How does that impact your financial responsibilities?

5. How Does Your Organization Get the Money It Needs to Operate? Start-up funds Trade credit Commercial banks On-going funds Cash flows from operations External financing Common stock Commercial loans and paper Bonds Preferred stock

6. Life Cycle view of Financing Start-up Savings Friends and relatives Angels Venture capital Trade credit (30 to 60 day) Growth 1 Private sale of shares Local banks Venture capital Asset-based loans or leases

7. Life Cycle view of Financing cont. Growth 2 IPO Money center banks and/or finance companies Asset-based loans or leases Maturity Commercial paper Bond-issues Follow-on share issues Money center banks and/or finance companies Asset-based loans or leases

8. Budgeting Functions Planning Choosing goals Reviewing options and predicting results Deciding on options Coordinating and communicating Gathering input from the several units within the organization Making sure that units support eachother Communicate expectations of senior management

9. Budgeting Functions cont. Monitoring Progress Assess progress of units toward overall goal Positive or negative variances Evaluating Performance Motivate employees through rewards based on performance Provide basis for compensation decisions Create a basis for future resource allocations

10. Types of Budgets Short-term budgets versus Long-term budgets Match budget term to needs Fixed term budgets versus Rolling budgets Firm life cycle issues Cash flow issues Incremental budgeting versus zero-based budgeting What is the basis for the budget? Unit budgets versus The Master Budget

11. Budgeting Assumptions What are the sales and marketing expectations for unit sales and revenues from new and existing products? Are supplier prices expected to rise or fall? What will be the cost of capital over the coming year? What external factors do we need to be concerned with and how are they expected to change over the budget period?

12. Top Down versus Participatory Budgeting Top-Down, goals set by senior management Budget goals reflect senior management’s more strategic vision Better coordination of budget requirements for all units Discourages unit managers padding of budgets High goals encourage managers to stretch to meet them

13. Top Down versus Participatory Budgeting cont. Participatory People responsible for achieving goals involved in setting goals Potential for a lack of strategic view Optimal budgets for all the units may not add up to an optimal budget for the organization

14. Tools for Management Decision Making Cost/Benefit analysis Accounting Return on Investment Payback Period Breakeven Analysis Fixed costs Variable costs Contribution margin Operating leverage

15. Time Value of Money A dollar today is not the same as a dollar tomorrow Present value x FVIF = Future Value Net Present Value Risk versus reward Single payback versus annuity Comparison to a zero risk investment