Page 1 of 7
Your Finance Department is primarily concerned with five issues:
- Acquiring the capital needed to expand assets, particularly plant and equipment. The company has two outside sources of money (stock issues are not permitted):
- Current Debt
- Bond Issues ( Long Term Debt)
- Profits
- Establishing a dividend policy that maximizes the return to shareholders.
- Setting accounts payable policy (which is entered on the Production spreadsheet) and accounts receivable policy (which is entered on the Marketing spreadsheet) .
- Driving the financial structure of the firm and its relationship between debt and equity.
- Selecting and monitoring performance measures that support your strategy.
Finance decisions should be made after the other departments enter their decisions. After the management team decides what resources the company needs, the Finance Department addresses funding issues and financial structure.
One of the Finance Department's fiduciary duties is to verify that sales forecasts and prices are realistic. Unrealistic prices and forecasts will predict unrealistic cash flow. The department should challenge the Marketing managers to defend their forecasts and pricing decisions.