Business Essentials, 11th Canadian
Edition by Ronald J. Ebert
Complete Chapter Solutions Manual
are included (Ch 1 to 15)
** Immediate Download
** Swift Response
** All Chapters included
,Table of Contents are given below
1.Understanding The Canadian Business System
2.The Environment Of Business
3.Conducting Business Ethically And Responsibly
4.Entrepreneurship, Small Business, And New Venture Creation
5.The Global Context Of Business
6.Managing The Business Enterprise
7.Organizing The Business Enterprise
8.Managing Human Resources And Labour Relations
9.Motivating, Satisfying, And Leading Employees
10.Operations Management, Productivity, And Quality
11.Understanding Accounting
12.Understanding Marketing Principles And Developing Products
13.Pricing, Promoting, And Distributing Products
14.Money And Banking
15.Financial Decisions And Risk Management
,Solutions Manual organized in reverse order, with the last chapter displayed first, to ensure that
all chapters are included in this document. (Complete Chapters included Ch15-1)
CHAPTER 15
FINANCIAL DECISIONS AND RISK MANAGEMENT
CHAPTER SYNOPSIS
This chapter begins with a discussion of the objectives and responsibilities of the financial
manager. Then, reasons are given why businesses need funds (short- and long-term
expenditures). The sources of short-term funds are noted (trade credit, secured short-term
loans, and unsecured short-term loans), as are the long-term sources of funds (debt and
equity financing). Securities markets are also described. Topics covered include the
operation of stock markets and stock exchanges, buying and selling securities, financing
securities purchases, short selling, mutual funds, and stock options. Financial management
in small businesses is also examined. The chapter concludes with a discussion of risk
management and describes the five steps in the risk management process. Information on
insurance as a method of risk management is presented in an Appendix at the end of the
text.
CHAPTER OUTLINE
I. THE ROLE OF THE FINANCIAL MANAGER
Financial managers plan and control the acquisition and dispersal of a company's
financial assets.
A. Objectives of the Financial Manager—The overall objective is to increase
the value of the firm, thereby increasing shareholder wealth.
B. Responsibilities of the Financial Manager—These fall into three general
categories:
1. Cash-flow management—Financial managers must ensure that the
firm has enough funds on hand to purchase the materials and human
resources it needs to produce goods and services.
2. Financial control—This is the process of checking actual
performance against plans to ensure that the desired financial status
occurs.
3. Financial planning—A financial plan, describing how a firm will
reach a desired financial position, requires knowledge of what immediate
funds are needed, when more will be needed, and what are the sources of
these funds. Financial managers must know why their firm needs funds and
be able to assess the pros and cons of potential sources of funds.
, Chapter 15—Financial Decisions and Risk Management
II. WHY BUSINESSES NEED FUNDS
A. Short-Term (Operating) Expenditures—These are incurred through
everyday business activities and handled through careful attention to the following
three areas.
1. Accounts payable—This is the largest part of short-term debt for
most companies. Good management means purchasing sufficient supplies
in a timely manner but withholding payment as long as it can without
jeopardizing its credit rating.
2. Accounts receivable—Financial managers need to project both how
much buyers will order and when they will pay. Credit policies are set to set
payment terms and make payment times more predictable.
a. Credit policies—These contain the regulations governing a
firm’s extension of credit to customers.
3. Inventories—Raw materials inventory, work-in-process inventory,
and finished goods inventory are described. All must be kept at
appropriate levels.
B. Long-Term (Capital) Expenditures—These are used for fixed assets. They
differ from short-term expenditures in that they are not normally sold or converted
into cash, their acquisition requires a large investment of funds, and they represent
an ongoing tie-up of company funds.
III. SOURCES OF SHORT-TERM FUNDS
A. Trade Credit—Essentially a short-term loan, it describes the granting of
credit by a seller to a buyer. The types discussed include open-book credit, a
promissory note, a trade draft, and a trade acceptance. The problems with trade
credit are noted.
B. Secured Short-Term Loans—These require the borrower to put up
collateral. The pros and cons of the various types of loans are discussed.
1. Inventory as collateral—A firm’s inventory is used as the collateral
to secure a loan.
2. Accounts receivable as collateral—They can be used as collateral by
pledging accounts receivable. Service companies depend upon this source
of funds.
393
Edition by Ronald J. Ebert
Complete Chapter Solutions Manual
are included (Ch 1 to 15)
** Immediate Download
** Swift Response
** All Chapters included
,Table of Contents are given below
1.Understanding The Canadian Business System
2.The Environment Of Business
3.Conducting Business Ethically And Responsibly
4.Entrepreneurship, Small Business, And New Venture Creation
5.The Global Context Of Business
6.Managing The Business Enterprise
7.Organizing The Business Enterprise
8.Managing Human Resources And Labour Relations
9.Motivating, Satisfying, And Leading Employees
10.Operations Management, Productivity, And Quality
11.Understanding Accounting
12.Understanding Marketing Principles And Developing Products
13.Pricing, Promoting, And Distributing Products
14.Money And Banking
15.Financial Decisions And Risk Management
,Solutions Manual organized in reverse order, with the last chapter displayed first, to ensure that
all chapters are included in this document. (Complete Chapters included Ch15-1)
CHAPTER 15
FINANCIAL DECISIONS AND RISK MANAGEMENT
CHAPTER SYNOPSIS
This chapter begins with a discussion of the objectives and responsibilities of the financial
manager. Then, reasons are given why businesses need funds (short- and long-term
expenditures). The sources of short-term funds are noted (trade credit, secured short-term
loans, and unsecured short-term loans), as are the long-term sources of funds (debt and
equity financing). Securities markets are also described. Topics covered include the
operation of stock markets and stock exchanges, buying and selling securities, financing
securities purchases, short selling, mutual funds, and stock options. Financial management
in small businesses is also examined. The chapter concludes with a discussion of risk
management and describes the five steps in the risk management process. Information on
insurance as a method of risk management is presented in an Appendix at the end of the
text.
CHAPTER OUTLINE
I. THE ROLE OF THE FINANCIAL MANAGER
Financial managers plan and control the acquisition and dispersal of a company's
financial assets.
A. Objectives of the Financial Manager—The overall objective is to increase
the value of the firm, thereby increasing shareholder wealth.
B. Responsibilities of the Financial Manager—These fall into three general
categories:
1. Cash-flow management—Financial managers must ensure that the
firm has enough funds on hand to purchase the materials and human
resources it needs to produce goods and services.
2. Financial control—This is the process of checking actual
performance against plans to ensure that the desired financial status
occurs.
3. Financial planning—A financial plan, describing how a firm will
reach a desired financial position, requires knowledge of what immediate
funds are needed, when more will be needed, and what are the sources of
these funds. Financial managers must know why their firm needs funds and
be able to assess the pros and cons of potential sources of funds.
, Chapter 15—Financial Decisions and Risk Management
II. WHY BUSINESSES NEED FUNDS
A. Short-Term (Operating) Expenditures—These are incurred through
everyday business activities and handled through careful attention to the following
three areas.
1. Accounts payable—This is the largest part of short-term debt for
most companies. Good management means purchasing sufficient supplies
in a timely manner but withholding payment as long as it can without
jeopardizing its credit rating.
2. Accounts receivable—Financial managers need to project both how
much buyers will order and when they will pay. Credit policies are set to set
payment terms and make payment times more predictable.
a. Credit policies—These contain the regulations governing a
firm’s extension of credit to customers.
3. Inventories—Raw materials inventory, work-in-process inventory,
and finished goods inventory are described. All must be kept at
appropriate levels.
B. Long-Term (Capital) Expenditures—These are used for fixed assets. They
differ from short-term expenditures in that they are not normally sold or converted
into cash, their acquisition requires a large investment of funds, and they represent
an ongoing tie-up of company funds.
III. SOURCES OF SHORT-TERM FUNDS
A. Trade Credit—Essentially a short-term loan, it describes the granting of
credit by a seller to a buyer. The types discussed include open-book credit, a
promissory note, a trade draft, and a trade acceptance. The problems with trade
credit are noted.
B. Secured Short-Term Loans—These require the borrower to put up
collateral. The pros and cons of the various types of loans are discussed.
1. Inventory as collateral—A firm’s inventory is used as the collateral
to secure a loan.
2. Accounts receivable as collateral—They can be used as collateral by
pledging accounts receivable. Service companies depend upon this source
of funds.
393
