财务管理(公司理财)个人理解(英文版)

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2024年4月25日发(作者：)

The understanding of the financial management

This team I learnt the Financial Management, which is an important subject

and a basic tool of management. The Financial Management is the

management of how to deal with Capital Budgeting, Capital Structure and the

Working Capital in certain principles as a whole, and financial management is

an integral part of the enterprise management, according to the financial legal

system, and the principle of financial management, it organizes the enterprise

financial activities, deal with financial relationship of an economic

management.

The goals of Financial Management

The enterprise is an organization, which is built for pursuing profit, and its

starting point and destination is profit, so Financial Management first should

consider the company’s profit, and there are some basic goals related with the

profit.

The first goal is to maximize the profit. Its basic point is that profit

represented the enterprise’s new wealth, more profit then explaining the

wealth of enterprises increases, and the more approximates to corporate goal.

But this kind of goal has its drawbacks that it does not consider profit obtained

the time value factors, it would be difficult to make right decision with the

same amount of money in different time point. What’ more it does not

consider the relationship between the profit and its invested capital, and finally

it doesn’t consider the relationship between the profit and the risk it will take.

While, the second goal is to maximize the current value per share of the

existing stock. It means that the company's profit should related closely with

the shareholder capital, and uses earnings per share to generalize the

enterprise financial management goal, thus to avoid defects in the "profit-

maximising gaol". But this goal still doesn’t consider earnings per share are

obtained the time value of factors, in addition, It still does not consider risks.

There’s a third goal that is enterprise wealth (value) maximization, and it

means add shareholder’s wealth is the financial management’s goal. But it’s

hard to measure. And the final goal is make the stakeholders’ profit maximum.

And it means not only considers the creditor, the shareholders and related

party interests, but also consider enterprise employees, customers and social

responsibility of the enterprise factors, and strive to make the interests of all

parties to maximize.

Financial Management decisions

So, when we make some financial decisions we should care all about the

parts of the financial goal. And what’s more, we should understand the basic

types of financial management decisions. There are three types of financial

management decisions: Capital budgeting, Capital structure, and Working

capital management.

The first decision concerns the firm’s long-term investments. the process of

planning and managing a firm’s long-term investments is called Capital

budgeting. In capital budgeting, the manager tries to identify investment

opportunities that are worth more to the firm than they cost to acquire, this

means that the value of the cash flow generated by an asset exceeds the cost

of asset. The types of investment opportunities that would typically be

considered depend in part on the nature of the firm’s business. Regardless of

the specific nature of an opportunity under consideration, financial managers

must be concerned nor only with how much cash they expect to receive, but

also with when they expect to receive it and how likely they are to receive it.

Evaluating the size, timing, and risk of future cash flows is the essence of

capital budgeting.

While the second decision called Capital Structure refers to the specific

mixture of long-term debt and equity the firm uses to finance its operations.

There are two main questions when looking at the capital structure - 1) How

much $ do we need to borrow to buy this long-term asset? 2) What are the

least expensive sources of funds for the firm? For example, since we are

thinking of buying this new crusher, we need to decide how we are going to

afford this new machine. In this example, we determined that if we cut back

a little bit on labor and in other areas, we would be able to afford the new

machine. In regards to where the money will come from, we do not take out

loans to buy long-term assets. We borrow from our company, and repay

overtime.

The third decision concerns working capital management. The term working

capital refers to a firm’s short-term assets, such as inventory, and its short-

term liabilities, such as money owed to suppliers. Managing the firm’s working

capital is a day-to-day activity that ensures that the firm has sufficient

resources to continue its operations and avoid costly interruptions. This

involves a number of activities related to the firm’s receipt and disbursement

of cash.

The core element in financial management

The three areas of corporate financial management are very broad and we

should deal these decisions well to make profit for the company. And we

should also care about the core element in finance management__ cash flow.

Cash flow is the movement of cash into or out of a business, project, or

financial product. It is usually measured during a specified, finite period of

time. Measurement of cash flow can be used for calculating other parameters

that give information on the companies' value and situation. Cash flow is very

important because it determines a project's rate of return or value. The time of

cash flows into and out of projects are used as inputs in financial models such

as internal rate of return, and net present value. What’s more it determines

problems with a business's liquidity. Being profitable does not necessarily

mean being liquid. A company can fail because of a shortage of cash, even

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