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Financial

management
Group 3:
1. Trn Th Vn Anh
2. Ng Nguyn Thin Duyn
3. L Hng Ngc
4. Nguyn Tho Hong Khuyn
5. on Hi T Quyn
6. Nguyn S Lm Trc
7. L Th Thanh Hng

Content
1. Steps to fiding financial planners
2. Short-term finance
a) Trade credit
b) Loans
c) Commercial papers

Finding financial planners


-Thinking
-Finding the
about
names
yourofneeds
financial
andplanner
expectations
-Checking local newspaper
-Defining your financial goals.
-Armed with a list of planners.
-Interviewing at least three planners.

Finding financial advisors


-Discussing risk with the planner.
-The planner will prepare a written plan
-The plan should be updated annually
to you and your money on track

LO financial management
and rising

Destiny the manager

Belle the assistant

t the trainee

Joan the head of a nurshing home


Need and expectation: borrowing and
investing money
Suggestion: trade credit

1. Estimate
cash outflows

2. Estimate
cash inflows
3. Compare

3. Determine
how to invest
excess cash

3. Determine ways
4. Identify and
to reduce outflows
compare outside
and/or increase
funding source
cash inflows

5. Estabilsh system
to monitor and
evaluate flow
of funds

Trade credit
1. Open-book credit (payment term that allow the
purchaser to take possesion of goods and pay later):
- Sometines referered to as an "open account"
- One of the oldest of the credit system
- An important source of funds for many business
- Most sellers investigate the credit rating of any new
customer befor extending credit
Show a financial statement
Ask the customer's bank

Trade credit
2. Promissory notes (unconditional written
promise to repay a certain sum of money on a
special date, drawn up by the borrower)
Provide a mean of safety credit to customers
Ex: You hesitate to let so borrow $500.000 -> use
promissory notes -> your bank (bill collector) "take
up" the note

Trade credit
3. Trade draft and acceptance (by the supplier):
- Trade draft: order to pay a stated amount of
money within a certain number of day drawn up by
the creditor
Customer signed
- Trade acceptance: signed trade draft that
commits the signer to repay a certain sum by a
certain day

Paying price
-Fee only: depending on the complexity of the
planning and where the planner works
-Fee plus commission: the customers pay a set
amount for the plan, then pay a commission to the
planner for purchasing recommended investments.
-Commission only: the customer never be certain
whether the planner is thinking of your needs or the
potential commission.

Blondy the widow


Inheriting a company
Need and expectation:
borrowing more money
for company to pay debt
and make purchase
Suggestion: tsecured and
unsecured loans

Board of directors
President
Vice president,
sales

Treasurer

Vice president,
finance

Vice president,
manufacturing

Controller

Director
Cost
Financial
Credit
Inventory
Tax
of capital
accouting accouting department
manager manager
budgeting

Loans
1. Secured loans: backed up with something of
value that the lender can claim in case of default,
such as a piece of property, requires a colleteral
Colleteral: account receivable
inventories
other property

Loans
1. Secured loans:
a) Account receivable: When loans are secured by
accounts receivable, the amounts due to the
business from customers with open-book accounts
are used as collateral.
Ex: Company A has sold $100,000 worth of sth.
-> Borrow $75,000 by promising that the lender will
get all the payment received from these customers.

Loans
1. Secured loans:
a) Account receivable:
Disadvantage: Expensive. About 2%
commission + an interest rate considerable higher
than straight loans.

Loans
1. Secured loans:
b) Inventories:
A compay with excellent credit rating and valuable
inventories
-> its bank or finance company may accept the
fiemed's signed statement that the inventories are
pledged to the render in the event of nonpayable

Loans
1. Secured loans:
c) Other property: the chattel mortgage: agreement
that the movable property purchased through a loan
belongs to the borrower, the lender has a legal right
to claim the property if payments are not followed.

Loans
2. Unsecured loans:
- Requires no collateral, granted on the basis of the
borrowers credit rating than tangible collateral
- The borrower have to maintain some minimum
amount of money at the bank. In addition, you also
need to care about the compensating balance.

Loans
2. Unsecured loans:
The compensating balance: although the borrower
pays interest on the full amount of the loan, a
substantial portion of it remains on deposit is the
bank

Loans
3. Another type:
-The line of credit; an agreement between a lender
and a borrower that states the amount of secured
short-term
the lender
will makerevolving
availableline
to of
If you wantloans
an iron-clad
agreement,
the
borrower
provided
thefee
lender has the fund.
credit
and paying
somethat
extra
-A kind of agreement on maximum amount of money
the bank is willing to lend my business during a
specific period of time

Fish the starter


Need and expectation:
borrowing additional funds to
have bigger pool of captial
long-term projects
Suggestion: commercial paper

Leverage
-Take money to make money
Leverage works both way: borrowing may magnify
-A
thatas
acts
lever
will magnify the power
theloan
losses
welllike
as athe
gains
of
borrow
funds which will combine
-> you:
Evaluate
theadditional
risk carefully
with the own funds to make a bigger pool of capital

Leverage
There are many sources of funds and many ways
to use these funds

Sources of funds

Uses of funds

Rent

Sales-revenues
Utilities
Retained earnings

Plants and equipments


Materials

Trade credit

Management decides
how to use funds
Commercial loans

Bonds

Advertising and promotion


Distribution
Wages and salanes
Interest and dividends

Stocks

Taxes

Marketable securities
- Find a good "parking place" for the funds
- The firm needs to lidiquate the investment for
instant cash
-> A number of short-term investments, called
marketable securities meets these needs
-Easily reverse the transaction, getting the cash
back by selling those formal commitment

Marketable securities
Many varieties of maketable securities:
- Certificates of deposit
- Treasury bill

Commercial paper
-Borrow from other businesses that temporarily
have excess cash to invest by issuing commercial
paper
-A promise to pay back a stated amount of money
within a stated number of days
- The business with excess cash generally buys
commercial paperat a discount from the face value;
at the end of the period, it receives the face values.

Commercial paper
-Does not requires a compensating balance
-Allows a borrower to lock in an acceptable interest
rate for a period 270 days
-When interest rates are rising rapidly, this
provision may be a real advantage

Commercial paper
-> May not be used to finance long-term projects
-> Issue new paper to cover the payment of
previous paper before construction was completed
-> Commercial paper is unsecured -> financing
option for only large corporations with top credit
ratings

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