Wiley CPA excel Exam Review 2014 Study Guide, Business Environment and Concepts

Module 44: Financial Management

Overview

This module describes major aspects of financial management. Financial management deals with the various types of monetary decisions that must be made by managers in a company, along with the tools and analyses used to make those decisions.

Working Capital Management

A. Managing Inventories and Receivables

Capital Structure

A. Long-Term Debt

B. Equity

C. Evaluating the Best Source of Financing

D. Dividend Policy

E. Share Repurchases

F. Financial Markets

Asset and Liability Valuation

A. Using Active Markets for Identical Assets

B. Using Markets for Similar Assets

C. Valuation Models

D. Valuation under US GAAP

Business Valuation

A. Market Approach

B. Income Approach

C. Asset Approach

Mergers

A. Considerations

B. Types of Mergers

Key Terms

Multiple-Choice Questions

Multiple-Choice Answers and Explanations

Written Communication Task

Written Communication Task Solution

Financial management includes the following five functions:

1. Financing function—Raising capital to support the firm’s operations and investment programs.

2. Capital budgeting function—Selecting the best projects in which to invest firm resources, based on a consideration of risks and return.

3. Financial management function—Managing the firm’s internal cash flows and its capital structure (mix of debt and equity financing) to minimize the financing costs and ensure that the firm can pay its obligations when due.

4. Corporate governance function—Developing an ownership and corporate ...