Did you ever stop to think about the importance of the finance function for a successful, multinational company (i.e, McDonalds, Apple, Johnson & Johnson, etc)? Someone has to manage the cash flow, bank relations, payroll, purchases of plant and equipment, and the acquisition of capital. Economic variables, such as gross domestic product, industrial production, disposable income, unemployment, inflation, interest rates, and taxes (to name a few) must fit into the financial manager’s decision model and be applied correctly. Is the company being run for the benefit of stockholders or top management? Based on key concepts learned in this Business Finance class, please explain finance concepts that businesses have to overcome in the area of financial statements (balance sheets, income statements, and the statement of cash flows), retained earnings, shareholders’ equity, depreciation, and historical/replacement cost. Please include at least two (2) of the following in your discussions and explain how they affect the financial process.
Capital Budgeting Techniques (decision making: replacement, expansion, post-audit, net present value, mutual exclusive projects, payback periods, etc.)
Project Cash Flows and Risk (cash flows, project evaluation, replacement analysis, acceptance/rejection of the project)
The Cost of Capital (components costs of capital, cost of debt, cost of retained earnings, and weighted average cost of capital)