1. Money Matters
Role of Finance A
Describe the role of finance in a business organization. B
Discuss capital investment decisions and working capital management.
Finance LAP 7

2. Finance and Accounting
Closely interrelated and may overlap
Key differences:
Focus
Finance—investment and money management decisions
Accounting—recordkeeping activities

3. Finance and Accounting
Key differences:
Ultimate purpose
Finance—boost growth, reduce risks
Accounting—provide accurate and timely information

4. Finance Activities Administration of assets (investment decisions)
Acquisition of funds (financing decisions)

5. Importance of Finance Helps set goals for the future
Plans and controls company spending
Ensures sufficient financing
Invests company money wisely
Decides whether to pay dividends

6. Relationships With Other Business Activities
Controls spending for production and marketing
Responsible for capital budgeting (collaborates with accounting)
Helps plan new projects and strategies

7. Capital Investment Decisions
Which projects to invest in—capital budgeting
How to finance—capital
Issuing stock
Getting a loan

8. Capital Investment Decisions
Whether or not to pay dividends
When?
How much?
Cash or stock?

9. What Is Accounting?
The process of creating the following financial records:
Income statement: Shows the profit or loss
Balance sheet: Balances the accounting equation (assets = liabilities + owner’s equity)
Maintaining the following:
Accounts _________: Money owed to others
Accounts ________: Money owed to the company

10. What Do Businesses Track with Accounting Information?
The value of the things they own (assets)
How much money they owe (liabilities)
The company’s net worth (owner’s equity)

11. Why Is Accounting Important to Businesses?
Enables them to maintain control of their money
Is used to make good financial decisions

12. How Does Accounting Maintain Financial Control?
Tracking the business’s spending
Planning for the future

13. Chris—financial manager
Working on a budget
Friend in marketing wants more money
What should he do?

14. Acknowledgments Original Developers:
Kerry Winfrey and Lelia Ventling, MBAResearch
Version 2.0
Copyright © 2014
MBA Research and Curriculum Center

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ThinkStock Photography
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