1.
ToTCOOP+i PROJECT
Unit 8
Management of financing and investment
issues
STRATEGIC PARTNERSHIP FOR INNOVATING THE TRAINING
OF TRAINERS OF THE EUROPEAN AGRI-FOOD COOPERATIVES

2.
INDEX
1. Message of welcome, participants introduction, explanation
of the rules and program of the training. Participants’ needs and expectations.
Introduction – basic terminology. Company’s finances, market environment,
benefits of finance management
2. Finance management – competencies and responsibilities of a person who
manages company’s finances
3. Financial management tasks. Budgeting
4. Rules of making good financial decisions. Making good financial decisions
5: Net Present Value – NPV. Competitive advantage of a company (90
minutes).
6: Three lenses theory
7: Making long – term decisions
8: Where to look for money for development?
9: Making short – term decision. Working capital and cash. General principles
of accountancy – bookkeeping and financial documents circulation
10: Questions. Evaluation. Summary and closure

3.
Activity 1
Message of welcome, participants
introduction, explanation
of the rules and program of the training.
Participants’ needs and expectations.
Introduction – basic terminology.
Company’s finances, market environment,
benefits of finance management

4.
Main goals
 Identification and establishing cooperative’s
financial management priorities, responsibilities,
executive limitations, and financial delegations
 Direction of the manager for preparing before the
end of each year an operating budget for the next
fiscal year for board approval
 Monitoring of financial management and prudence
through policies, financial reports and established
metrics, and identification and adoption of
necessary adjustments

5.
Object
 The essence of corporate finance
 Features finance management- responsibilities
 The current financial management company
 Cost / expenditures accounting as a basis for
finance management
 Financial decisions in a company
 Budgeting

6.
 Making proper decisions
 Three lenses theory
 Cash flow statement, methods of
preparing it
 Working capital management
 Material investments efficiency evaluation
 Investments

7.
Company’s finances?
All economics phenomena related to
revenues and expenditures in terms of
company’s goals

8.
What are the principles of company’s
financial means management
Acquisition of financial sources for company’s
operations (capital) and investing it in such a way
that the strategic goal of maximizing profits for
the company’s owners, that is those who invested
their capital, can be carried out indelibly.

9.
Shareholders ‘s profits:
 dividends
 Increase in value of assets in their
possession

10.
Features of a company
 Economics entity
 Legal entity
 Organizational entity

11.
A company on a market
COOPERATIVE
political and
legal
environment
economic
environment
social and
cultural
environment
technologica
l
environment

12.
Activity 2
Finance management – competencies and
responsibilities of a person who manages
company’s finances

13.
Functions of financial
management?
organizational activity
business decision – making
monitoring

14.
Features of finance
management - responsibilities

15.
Organization and management of
information flow inside the company
- information flow inside the company
is aimed at enabling financial operations
monitoring, indicating potential dangers which
could require measures to be taken and
facilitating
proper evaluation of the financial situation of
the company .

16.
Informing owners of the company’s
financial issues and predicted /
planned developments
Decision making when it comes
to capital acquisition – ensuring
financial liquidity is maintained

17.
Maintaining contacts with all the
stakeholders – creditors, debtors, fiscal
administration

18.
Experience, knowledge and competencies
of a person responsible for company’s
finances need to be adjusted to:
 Scale of company’s operations
 Size of a company
 Type of a company

19.
Exercise
 What are the basic and additional
competencies of a person responsible
for my company’s finances management
today?
 What will the above mentioned be
in five years’ time.

20.
Activity 3
Financial managements task.
Budgeting.

21.
Financial management tasks
financial planning
(budgeting)
execution of the financial
plan (providing financing)
control (controlling the
implementation of financial
plans (monitoring może
byłoby lepsze?)

22.
BUDGETING
Most
popular
forms
Continuous budgeting – producing a detailed budget for
the first quarter and a general, less detailed for the rest
of the year
Incremetal budgeting – budgeting based on previous
data usually multiplied by a certain variable, „from
scratch” – budgeting based on a precise analysis as if it
was done for the very first time
Up – high – budgeting at the level of high managerial
stuff
Participative – management personnel produce
a strategy, others produce fragmentary budgets

23.
BUDGETING – functions
 Inspiring planning in a systematic way
 Promulgating plans and goals
 Providing data for the sake of inspections
 Actions coordination
 Cooperation coordination

24.
Steps in budgeting
preparation
operation
supervision

25.
Development of the assumptions in the
budget
Establishment of the budget
Reconciliation and budget approval
Control of budget
Reaction to the results of the
inspection

26.
Activity 4
Rules of making good financial decisions.
Making good financial decisions

27.
How to make good financial
decisions?

28.
Egoism principle –
company’s sake is the
highest priority
Risk taken – return on
investment principle
Aversion to risk principle
Principles of financial decision
making

29.
Observing and following leaders who
operate in the field of our business
principle
Use of data and information which
appear on the market
Profits increase principle

30.
Exercise
Analyse decisions made last month
in your company – what principles did
you take into consideration?

31.
What is
'Net Present Value - NPV'
Net Present Value (NPV) is the difference
between the present value of cash inflows
and the present value of cash outflows.
NPV is used in capital budgeting to
analyze the profitability of a project or a
projected investment.

32.
Activity 5
Net Present Value – NPV.
Competitive advantage
of a company

33.
NPV = (i=1 S t) CFt/(1+r)t - Ni
 CFt - net cash flow (incomings minus expenditures),
 r - interest rate (expected rate of return on investment),
 t - number of periods,
 Ni - investment expenditure,
 Positive value of NPV means that the investment
(finance or develoment) has been profitable i.e. today’s
value of future profits is higher than investment
expenditures related to utilization.
 Negative value of NPV means that the investment
project should be rejected due to its non – profitability

34.
Exercise
Select one of your company’s last year’s
investments and evaluate it if it was
profitable according to NPV management
principles.

35.
The competitiveness
of the company
 A company with better economic results has the advantage
when it comes to competitiveness,
 Features of the advantage
in the area of competitiveness:
 type,
 magnitude,
 durability.
 4 levels of competitiveness (types) according to P. Kotler
 Within a brand (similar product and service) e.g.
manufacturers of van vehicles,
 Within the area of industry
(e.g. all manufacturers of cars),
 Within a form of product (means of transport
manufacturers),
 Competition in general (any products and services).

36.
Source of advantage
in the area of competitiveness
 High quality, serviceable and lasting
products
 Following the needs of clients and providing
a better offer than competition
 Capability of expanding to new markets and
development of new lines of products
 Better location and access to primary
products or raw materials
 Highly quallified personnel
 Efficient financial sources
 Innovativeness

37.
Exercise
Explain the advantages of your
company in the area
of competitiveness

38.
Activity 6
Three lenses theory

39.
Three lenses theory
Three aspects of analyses – the way one
should look at a company:
1. Economics
2. Finance
3. Assets

40.
Economic lense
Profit
Loss
Sale profits
Return on
investment
rate
Rate of
profit

41.
Financial lense
 It provides an answer to the question
of how the efficiency of assets
management influences financial
issues in a company. The answer can
be found in an operational activities
cash flow report
 Temporary or permanent loss
of financial liquidity in most cases
leads to the bankruptcy

42.
Assets lense
 Risks of running a comapny
 Answers to the following questions:
 What are the financial sources spent on company’s
assets?
 What are the relations between current and non –
current assets and how they influence operational risks?
 What assets belong
to the company?
 What does the structure of equity and liabilities look
like? What
is the size of foreign finance contribution in terms of
equity and liabilities which influences financial risks of a
company. (Nie do końca zrozumiałem, czy to pasywa
„się przekładają” czy udział obcego kapitału „się
przekłada” na ryzyko?)

43.
Three basic strategies of financing
company assets:
 Dynamic
 Conservative
 Moderate

44.
Activity 7
Making long – term decisions

45.
FINANCE DECISION
MAKING
Decisions
Long – term Short – term

46.
Long – term decisions
1
Investment decisions
2
Project financing decisions
3
Decisions about dividends (dividend policy)

47.
 Requirements when it comes
to making investment decisions:
Evaluation of the value of particular
projects,
Defining the scale
of the investment,
Time needed for project(s)
implementation
Predicted cash flow related
to the project

48.
Financial decisions
Capital Internal
Entry fee
Share
Participation
Contribution
Amortization
Part of a profit

49.
Capital External
Credits
Loans
Grants
Issueing
shares, stocks,
bonds, etc.
Other
Financial decisions

50.
Activity 8
Where to look for money
for development?

51.
External capital
 Enables to use the effect of financial leverage –
additional profits, after foreign capital is paid off,
they increase profitability of an investment / project.
When losses are incured though, the foreign capital
instalements which have to be paid off will make the
losses even higher
 External capital is a cheaper source of finance;
 External capital enables to use
the effect of tax credit / tax shield
– by decreasing the cost of capital.
It is possible thanks to regarding foreign capital
instalments as tax deductible expenses.

52.
BANK CREDITS – CONDITIONS
TO BE ENTITLED
 types of bank credits
 working capital credit
 investment credit
 credit applications
 evaluation of credit rating
(creditworthiness)
 types of credit collaterals

53.
Where to look for money
for development?
 Finance market
 Money market
 Currency market,
 Capital market,
 Stock market,
 Alternative sources of financing
a company’s development

54.
Other sources of financing
a company’s development
 Factoring
 Franchasing
 Forfaiting
 Leasing

55.
European Union financial
contribution to investment projects
– principles
Concentration of financial means
Subsidiarity
Sustainable and balanced development
Efficiency
Evaluations / assessments
Partnership
Management improvement
Programming
Equal opportunities and gender perspective
Civil society

56.
Activity 9
Making short – term decision. Working
capital and cash. General principles of
accountancy – bookkeeping and financial
documents circulation

57.
SHORT – TERM DECISIONS
 GOALS:
 Ensuring adequate volume of cash flow
in order not to be in arrears with long –
term debts, current and unexpected
expenditures
 Maximum increase of value takes place
when the return on investment is higher
than the cost of capital incured.

58.
Short – term decisions concern
management of company’s working
capital
 Sufficient working capital prevents
from:
High costs of capital acquisition for
company’s current expenditures
Losses incured in case there
is an urgent need to sell assets
(below the market value)
SHORT – TERM DECISIONS

59.
PRINCIPLES
 Sufficient reserves need to be maintained in order to
facilitate uninterrupted production process and meeting
the demand for products . There is also a need to
minimize costs of orders, transport and storage.
 Sufficient financial means should be kept so that all
financial liabilities can be dealt with on time. There
ought not to be excessive spare cash which could be
used to finance investments or other projects.
 Suitable structure of short – term financial sources
should be selected (among others credit lines, trade
credits, factoring) in order to minimize the costs of
debts, credits ad other liabilities.

60.
WORKING CAPITAL
PROCESS CYCLE
Purchase
of raw
materials /
services
Production
process /
services
provision
Final
product/
service
provided
liabilities
Cash

61.
Optimisation of current assets
Reserves optimisation
 keeping no reserves – only in a hypothetical
perfect situation
establishing optimal quantities
of reserves
Cash management
 planning income and expenses
Management of due payments
 value of products and/or services sold,
before actual cash has been transfered from
a customer

62.
The purpose of cash
management
Maximizing the benefits of having cash

63.
How to do it?
 reduction of cash on hand the company –
maintaining a certain level of current interest –
bearing bank account
 the use of the system of deposits offered by
banks, for example, overnight
 investing resources in long-term securities,
such as treasury bills or bonds
 Warning – you have to remember that these
investments can lose!

64.
General principles
of accountancy – bookkeeping
 Account books
 Accounting records
 Location of accounting department

65.
Description of accountancy principles
should comprise:
 Current / working year
 Methods of assessments of assets and
liabilities
 Methods of keeping the account books
 Description of a data processing system
 Data protection system

66.
Circulation of financial document
model
 Decision to purchase products/services
 Recording the document (register of
incoming letters, documents, etc.)
 Content related decree
 Formal decree
 Payment approval
 Payment
 Recording in the books and archiving

67.
Description of a financial
document
In accordance with:
 Accountancy and tax laws
 Requriements of financial authorities
 Managerial reqirements

68.
QUESTIONS?