Raising and managing of funds by business organizations. Such activities are usually the concern of senior managers, who must use financial forecasting to develop a long-term plan for the firm. Shorter-term budgets are then devised to meet the plan's goals. When a company plans to expand, it may rely on cash reserves, expected increases in sales, or bank loans and trade credits extended by suppliers. Managers may also decide to raise long-term capital in the form of either debt (bonds) or equity (stock). The value of the company's stock is a constant concern, and managers must decide whether to reinvest profits or to pay dividends. Other duties of financial managers include managing accounts receivable and fixing the optimum level of inventories. When deciding how to deploy corporate assets to increase growth, financial managers must also consider the benefits of mergers and acquisitions, analyzing economies of scale and the ability of businesses to complement each other. See also corporate finance; inventory.
This entry comes from Encyclopædia Britannica Concise.
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