Chapter 17 Essay

The Role of Finance and Financial Managers

What is the difference between an accountant and a financial manager?

Financial managers examine the financial data prepared by accountants and make recommendations to top management regarding strategies for improving the health of the firm.

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What activities are financial managers responsible for?

Financial managers are responsible for seeing that the company pays its bills at the appropriate time and for collecting overdue payments to make sure that the company does not lose too much money to bad debts.

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Describe three of the most common ways for any firm to fail financially.

Three most common ways for any firm to fail financially are

a. undercaptitalization - not enough funds to start with;

b. poor control over cash flow;

c. inadequate expense control.

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Financial understanding is important to anyone who

Financial understanding is important to anyone who wants to start a small business, invest in stocks and bonds, or plan a retirement fund.

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Financial Planning

What is the overall objective of financial planning?

Financial planning involves analyzing short-term and long-term money flows to and from the firm. The overall objective of financial planning is to optimize the firm's profitability and make the best use of its money.

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What are the three steps involved in financial planning?

Financial planning involves

a. forecasting both short-term and long-term financial needs;

b. developing budgets to meet those needs;

c. establishing financial control....