Financial Management . Ass . Prof. Dr. Özgür KÖKALAN İstanbul Sabahattin Zaim University. Chapter Objectives. Define Financial Management Sources of Funds. Financial Management.
Ass. Prof. Dr. Özgür KÖKALAN
İstanbul Sabahattin Zaim University
Financial managers prepare cash forecasts to assess the possible movements of cash in the near future.
As we previously stated, the cash situation of the company, especially in the recession or in buyers’ market conditions, has ' vital influence over the company’s achievements and survival. Therefore any organization in business should give utmost attention to its cash management.
One popular type of equity capital is venture capital. Capital owners investing their money in the new, young and untried businesses in return for the excess profits is called venture capital.
Creditors more be concerned about the organization’s giving them a guarantee for their lent funds to be paid with the interest at the maturity date. Many lenders may ask the borrower to give some concrete guarantees for their re-payment at the maturity date. Secured loans are those that provide guarantee for the lender given by the borrower in the form of bonds, assets and security deposits or mortgages.
TradeCredit, is one of the primary sources of short-term debt that is provided by suppliers to finance the organization's purchasing goods and services from them. These credits could be in unsecured or secured form.
Factoring,is another type of short-term loan. Organizations sometimes sell their receivables collected from their customers with a discounted price to a financial institution (factoring companies) before the due time. Factoring companies (usually called factor), in turn, pay the organization immediately and collect the money from the principal debtors (customers of the borrower) on the maturity date.
Long term loans issued by financial institutions can benefit by usually large companies. Financial institutions like banks sometimes receive huge international long-term credit facilities to be used to finance longterm needs of the several recognized large companies in the national economy.
Therearemanykinds of longtermdebts. Theseare:
Corporate bonds are one of the long-term borrowing means by which organizations borrow money directly from the public. These bonds usually pay annual or semiannual coupons. Some of these bonds that give the bondholder an option to exchange each bond with specified number of shares of the common stocks of the organization are called convertible bonds.
Individuals in society are typically the net savers and seek financial assets that would maximize the return on their investment.
Financial marketsareclassified as moneymarketsandcapitalmarkets.
Investment bankers specialize in the sale of new commercial papers and securities to the public while professional investment companies manage the money of investors such as individuals and companies, and institutions such as mutual funds.
Derivative markets are founded as a result of a great demand coming from financial institutions for risk reduction. The practice of offsetting risks is usually known as hedging.
Option market: To limit their downside risk managers buy options on commodities and currencies. Options are contracts that give the buyer (the buyer of the option contract) the right to purchase or sell the commodities or instruments at a specified price agreed upon today (exercise price) within a specific period of time.
Forward market: As we stated above the future contracts are usually standardized products that are tradable. They can be sold and purchased in the market. A forward contract is a typical future contract but tailor-made for the parties involved.