1. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 1 Financial Management and Banking

2. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 2 The Role of Financial Management Current needs Future needs –Sources of funds –Uses of funds –Maximizing company value

3. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 3 Implementing the Financial Plan Monitoring cash flow –Accounts receivable and payable –Inventory control Managing cash reserves –Marketable securities –Electronic cash management

4. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 4 Operating Budget Master budget –Cost control –Expenditures –Plan for the future –Financial control

5. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 5 Capital Budget Process Request Review Evaluate recommend

6. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 6 Financing Operations and Growth Length of term Cost of capital Debt or equity

7. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 7 Length of Term Less than one year –Short-term financing Greater than on year –Long-term financing

8. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 8 Long-Term Financing Internal sources –Retained earnings –Sale of assets External sources –Debt capital –Equity capital

9. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 9 Cost of Capital Company risk Interest rates Opportunity cost

10. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 10 Debt versus Equity CharacteristicDebtEquity MaturitySpecificNonspecific Claim on IncomeFixed CostDiscretionary Cost Claim on AssetsPriorityResidual Influence Over Management LittleVariable

11. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 11 Types of Debt Financing Trade credit Commercial paper Secured loans Unsecured loans Leases Bonds

12. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 12 The U.S. Financial System Deposit  Commercial banks  Savings and loans  Mutual savings banks  Credit unions Nondeposit  Insurance companies  Pension funds  Finance companies  Brokerage firms

13. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 13 Financial Services Checking and savings accounts Business and consumer loans Credit, debit, and smart cards Electronic banking

14. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 14 Checking and Savings Accounts Demand deposits Statement savings Money market and CDs

15. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 15 Business Loans Expansion Construction Purchases Renovation

16. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 16 Short-Term Credit Credit cards Debit cards Smart cards

17. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 17 Electronic Banking Automated teller Electronic funds transfer Online banking

18. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 18 Evolving U.S. Banking Environment Repeal of the Glass-Steagall Act Emergence of financial supermarkets Breaches in the “Chinese Wall” Resurgence of community banks Struggling Internet banks

19. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 19 Repeal of Glass-Steagall Financial Services Modernization Act 1999 –Financial institutions –Brokerage firms –Insurance companies

20. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 20 Financial Supermarkets Financial institutions Securities firms

21. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 21 Breaches in the Chinese Wall Research functions Lending functions Stock brokering Investment banking

22. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 22 Community Banks Target markets Flexibility Personal service

23. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 23 Struggling Internet Banks Customer service problems High expenses Negative cash flow

24. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 24 Bank Safety and Regulation Federal Deposit Insurance Corporation Savings and Loan Association National Credit Union Association State Banking Commission Federal Reserve System Comptroller of the Currency

25. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 25 Functions of the Federal Reserve Influencing U.S. money supply Supplying currency Clearing checks

26. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 26 What is Money? Medium of exchange Measure of value Store of value

27. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 27 U.S. Money Supply Hard Currency Demand deposits Time deposits

28. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 28 Influencing the Money Supply Reserve requirements Discount rate Open-market operations Selective credit controls

29. © Prentice Hall, 2005Excellence in Business, Revised Edition Chapter 17 - 29 Federal Reserve Functions Supplying currency Clearing checks