Categories of finance (intro. to business finance)

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Categories of finance (intro. to business finance)

  1. 1. Categories of finance PUBLIC FINANCEPUBLIC FINANCE PRIVATE FINANCEPRIVATE FINANCE
  2. 2. PRIVATE FINANCE • BUSINESS FINANCE • FINANCE OF NON-PROFIT ORGANIZATION • PERSONAL FINANCE
  3. 3. GOAL OF BUSINESS FINANCE • MAXIMIZING PROFIT • MAXIMIZING PROFITABILITY • MAXIMIZING PROFIT SUBJECT TO CASH CONSTRAINT • MAXIMIZING NET PRESENT WORTH • SEEKING AN OPTIMUM POSITION ALONG A RISK-RETURN PROFIT
  4. 4. TOOLS OF BUSINESS FINANCE • THE FINANCIAL STATEMENT THE BALANCE SHEET THE INCOME STATEMENT • THE BUDGET THE SALES BUDGET THE MATERIALS AND PURCHASES BUDGET THE PRODUCTION BUDGET • THE ANNUAL REPORT
  5. 5. SIGNIFICANCE OF FINANCIAL STATEMENT AND BUDGETS • ANTICIPATE ASSET NEEDS; • PLAN FOR NECESSARY FINANCING • ESTABLISH STANDARDS BY WHICH TO TEST CURRENT OPERATING PERFORMANCE
  6. 6. CAPITAL BUDGETING Capital Expenditures Substantial outlay of funds for the purpose of which is to lower costs and increase net income for several years in the future
  7. 7. CAPITAL BUDGETING • CAPITAL EXPENDITURES • 1. replacement investments • 2.expansion investments • 3. product line investments • 4. strategic investments
  8. 8. REPLACEMENT INVESTMENTS • Investments on replacement of worn-out or obsolete facilities
  9. 9. EXPANSION INVESTMENTS • To provide additional facilities to increase the production capability of the firm
  10. 10. PRODUCT LINE INVESTMENTS • Expenditures on new products and on improvements of old products with the combined features of replacement and expansion investments.
  11. 11. EXPANSION INVESTMENTS • Investments designed to accomplish the overall objectives of the firm.

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