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1
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• ??????500?
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• ???????100?,?????29?

2
Most new businesses require real money to get
started and to keep operating until theyre up
and profitable.
3
Financial manager

• The person in a company responsible for
  developing and implementing a firms financial
  plan and for determining the most appropriate
  sources and uses of funds.

4
Why firms need money

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

5
When you need money, do you take on debt, or do
you sell equity?
6
Debt financing (????)
AdvantagesFirms may use the concept of
leverage to increase profitability

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

Debt financing relies on borrowed funds that
must be repaid
Disadvantage Debt can be a heavy burden when
profits are scarce
7
Equity financing (????)

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

• Advantages
• Control of repayment
• Growth potential

Equity Financing Selling part of the firm to
investors

• Disadvantage
• Loss of control
• Loss of privacy

8
Depending on factors such as 1. interest rates
2. the rate of return that a firm can earn on
borrowed money3. the owners desire to maintain
or give up control, and 4. status of equity
markets, financial managers earn their pay by
carefully fine-tuning their firms capital
structure on a continuing basis.
9
Financial plan
A financial plan specifies the sources of funds
and the expected inflows and outflows for a
period of time

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

Inflows
Outflows

• Sales
• Accounts receivables
• Interest income

• Inventory
• Payroll
• Debt service

10
Creating a Business Plan The Financials1

• The most important element of your business
  plans financial section will be financial
  forecasts.

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

11
Creating a Business Plan The Financials2

• A good financial plan will provide the following
  information
• A current balance sheet
• An analysis of how much revenue needs to be
  generated to break even
• Projected profit-and-loss statements
• Assumptions upon which the previous projections
  were based
• Projected statements of cash flow
• Copies of relevant documents such as tax returns
  and financial statements from principal
  owners/investors, loan applications

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

12
Creating a Business Plan The Financials3

• If the purposes of the business plan is to
  solicit financing, which should also include
• How much money is needed
• Why its needed
• How it will be used
• When it will be repaid

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

13
Short term financing
Sources of short-term financing Repaid in one
year or less

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

Personal Savings
Trade Credit
Banks
Factoring and Leasing
14
Personal sources

• Credit cards
• Personal savings
• Cashing in or borrowing from retirement funds
• Home equity loan
• Line of credit
• Relying on friends and relatives for gifts, loans
• Cosigners on bank notes

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

15
Trade credit1

• Definition
• Credit provided by one firm to another.
• Open-book credit (???????)
• Credit provided when a seller ships goods to a
  buyer on faith that payment will be made in
  compliance with the sellers stated credit terms.

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

16
Trade credit2

• Promissory note (????????)
• A written agreement with a promise to pay.
• A promissory note states how much money will be
  paid to the seller, and when this payment will be
  made.
• Sellers, in turn, frequently sell the note to a
  bank at a discount in order to turn it into
  immediate cash.

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

17
Trade credit3

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

• Trade drafts (????)
• A formal commitment to pay that is initiated when
  a buyer takes receipt of merchandise and sign an
  attached document.

18
Case study

• Alan Roman wanted to open a check-cashing store.
• Projected profit
• 700 paychecks a week, average of 550 each check,
  service charge 2, gross profit 7700 a week.
• Working capital 400,000
• The bank provided a 400000 revolving line of
  credit.
• First year Alan cut the line of credit down to
  150000
• Second year Alan no longer needed the banks
  credit.

19
Banks and other financial institutions1

• Secured loans (?????)
• Bank loans backed by collateral.
• If a firm fail to meet their repayment
  obligation, the lender can take possession of the
  assets you placed as collateral, sell them, and
  pay off any balance due.
• Since secured loans are less risky to lenders,
  they will carry a lower rate of interest than an
  unsecured loan.

• Why firms need money Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

20
Banks and other financial institutions2

• Line of credit (????)
• A standing agreement between a business and a
  bank in which the bank agrees to lend the firm a
  maximum amount of money on request.
• With lines of credit, actual interest charges
  dont begin accumulating until money is actually
  lent.
• ??,???

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

21
Banks and other financial institutions2

• Revolving credit agreements (??????)
• A guaranteed line of credit available on a
  continuing basis.
• Letter of credit (???)
• Promises by a bank to pay a seller a given amount
  if certain conditions are met.
• The fee for the letter of credit would be on top
  of any initiation or interest charges for a loan.

• Why firms need money Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

22
Banks and other financial institutions3

• Commercial paper (????, C/P)
• Short-term notes, backed solely by a companys
  promise to pay.
• ?????????????????,??????270???(????60-180?)
  ,???????????,????????,????????????????????????????

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

23
Banks and other financial institutions4

• ???????????????(CP?)????????(CP?)
• CP1????????????????
• CP2????????????????????????????,?????????????????
  ????,???????????????????
• ??????,??????,?????????????????????
• ?????????????
• ?????????????????????????????
• ??????,??????,???????????????????????????????

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

24
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• ?????
• ????????????
• ??????
• ??????????????
• ????????????????
• ??????
• ?????????????,???????????????????,?????????,??????
  ?
• ?????????,???????

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

25
Factoring (??????)1

• The practice of selling accounts receivable for
  cash.
• A firm arranges to sell come or all of its
  accounts receivable to a factor. The factor will
  immediately advance from 50 to 80 percent of the
  face value of the invoices. When the customer
  pays the bill in full, the factor takes out its
  fee of between 2 and 7 percent and pays the
  balance to the selling firm.

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

26
Factoring (??????)2

• Advantage
• Firm can turn the assets into cash in a few days
  rather than waiting 30 days or longer for
  customers to pay.
• The factor assumes the risk of making collections.

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

27
Case

• ????,???? (Factoring)
• ????????(Leasing)
• ???????????????

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

28
Government and community agencies

• ????????
• ??????????
• A government agency that provides guarantees on
  loans to small business borrowers by primate
  lenders.
• www.smbcgf.org.tw

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

29
Long-term financing

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

30
Retained earnings(????)

• Meaning
• Earnings kept by a firm for its own use rather
  than paid as dividends to stockholders.
• Advantages
• Firm can provide their stockholders with a
  greater long-term return by using their retained
  earnings to fund internal projects.
• No loss of control.

• Why firms need moneyWhy firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

31
Bonds(??)

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

Bonds Certificates of indebtedness issued by a
corporation
Secured Bonds A debt security backed by company
assets
Debentures Unsecured bonds backed only by
reputation
Callable Bonds Caller has the right to pay them
off before maturity
Convertible Bonds Can be converted into shares
of common stock
32
Corporate bonds(???)

• ????????????????,??????????????,??????????????????
  ???????(debentures),???????????????
• ?????
• ?????????????
• ??????
• ????????????

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

33
Secured bond(????)

• If the bond issuer cant pay, the bondholders can
  take possession of the asset, sell it, and recoup
  the amount lent.
• Secured securities limit the sellers control
  over the pledged assets. Assets that are
  collateral for a secured bond usually cant be
  moved, modified, or sold without approval of the
  bondholders.

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

34
Callable bonds(??????)

• Advantage
• If interest rates drop significantly, firms with
  callable bonds outstanding are likely to activate
  the call feature, pay them off, and issue new
  bonds at a lower rate.
• Disadvantage
• Higher interest rate than the bond that without
  the callable feature.

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

35
Convertible bonds(??????)

• Investors standpoints
• The security of a bond
• The price appreciation potential of a common
  stock
• Firms standpoint
• While convertibles have a lower interest rate
  than traditional bonds, they have the potential
  to dilute equity.

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

36
Stocks

• Meaning
• Shares of ownership in a firm
• Type of stock
• Common Stock
• Voting rights
• Dividends
• Last claim on assets
• Preferred Stock
• Priority claim on assets
• Dividends
• No voting rights

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

37
Initial Public Offering (IPO) (??????)

• The first public offering of common stock by a
  company.
• Investment banker (????)
• A firm that assists in the issue and sale of new
  securities.

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

38
????

• ????????????
• ??????
• ???????
• ???????
• ????
• ??????????????

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

39
????????????

• ????
• ?????????????,???????????,??????????,?????????????
  ???
• ????
• ?????????,????????????,?????????????,?????????,???
  ????,???????
• ?????????????????????????

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

40
Venture capitalists(?????)

• Meaning
• Business firms, small groups of individuals, and
  mutual funds that invest money in companies with
  rapid growth potential in exchange for partial
  ownership.
• Angel investors
• Wealthy individuals who invest in new startups in
  exchange for some equity ownership.
• ?????????????? www.tvca.org.tw

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

41
Security markets(????)1

• Type of securities
• Stocks
• Bonds
• Mutual funds(????)
• A grouping of pooled funds used to purchase a
  portfolio of package of securities.
• Type of bonds
• Corporate bonds
• Government bonds
• Municipals bonds

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

42
Security markets(????)2

• Blue-chip stocks(???)
• Stocks of high-quality firms with long histories
  of solid growth and dividends.
• Assessing a stocks value
• Earnings per share, EPS(????)
• The companys net earnings divided by the number
  of shares outstanding.
• Growth rate of earnings(?????)
• For mature companies, a price-earnings
  ratio(???)the current price of a stock divided
  by the firms current annual earnings per share
  of between 8 and 20 typically represents fair
  value.

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

43
Security markets(????)3

• Strategies1
• Investors(?????)
• Following an investment strategy that focuses on
  long-term returns.
• Traders(?????)
• Following a trading strategy that moves them in
  and out of stocks in an effort to capitalize on
  short-term price movements..
• Short sale(??)
• Selling stock that is borrowed from a broker in
  the hope that it can be bought back and replaced
  at a later date for a lower price.

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

44
Security markets(????)4

• Strategies2
• Option(?????)
• A right to buy or sell a fixed number of shares
  of stock at a specified price over a limited time
  period.

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

45
??

• ???????SARS
• ?????
• ??150?????
• ??????????
• ?????????
• ???????

46
Four strategies for managing risk

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

47
Avoidance (??)

• Methods
• Stay out of certain markets
• Turn down lucrative contracts that might expose
  the firm to undue risk
• Outsource high-liability functions like
  transporting hazardous waste
• Disadvantage
• Can result in missed opportunities

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

48
Reduction (????)

• Methods
• Removing hazards
• Conducting safety programs
• Training employees in proper techniques

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

49
Self-insurance (????)

• Methods
• Set up an internal fund
• Purchasing a catastrophe policy

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

50
Transfer (????)

• Methods
• Buying insurance

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

51
???? Example

• ??????(??)
• ??????????????????????(????)
• ??????????(????)
• ???????(????)

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

52
Insurance

• Basic insurance
• Property
• Liability
• Health
• Accident
• Life
• Beyond the basics

• Why firms need money
• Equity and debt financing
• Financial plans
• Business plans
• Short-term financing
• Long-term financing
• Security markets
• Managing risk

53
Responsibilities to financial sources

• Interest of shareholders
• Providing accurate and reliable information
• Avoiding profiteering on inside information
• Managing risks with appropriate insurance
  coverage.

54
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• ????????
• ?????
• ??
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• ????