[...]... management is highlighted FINANCE AND FIRM VALUE Finance and accounting are exciting subjects as we enter the 21st century The daily newspapers (not just the business press) as well as radio and television carry dramatic stories of growth and decline of firms, earnings surprises, corporate takeovers, and many types of corporate restructuring To understand these developments and to participate in them... operations, and outcomes The objective is to create an information flow to provide rapid feedback as a basis for the revision of strategies and decisions to enlarge the growth opportunities of firms and to improve their performance So there are important ways in which financial executives can contribute to the improved performance of a firm and therefore of its value This is the central theme of this book, and. .. senior vice president 8 PART ONE Accounting and Finance Fundamentals Specific finance functions are typically divided between two highranking financial officers—the treasurer and the controller The treasurer handles the acquisition and custody of funds The controller’s function includes accounting, reporting, and control The treasurer is typically responsible for cash acquisition and management Although the... employee benefits, and employment taxes of production supervisors and plant general management, and depreciation expense for the plant and production equipment Before we discuss the selling, marketing, and administration expense, depreciation expense deserves some special attention U.S GAAP accounting is prepared using accrual-based accounting, which is in sharp contrast to a cash-based accounting As a... present additional attributes for evaluating a team’s performance and individual contributions to the team’s success Although assessing the performance of a firm is more complicated because there is no simple “score,” financial statements and their projections provide information for judging a company’s performance This company assessment is extended to assessing the performance of the management team... million per year Therefore, the judgments of senior managers with finance backgrounds are valuable in arriving at decisions with bankers on the timing and terms of a loan Also, the finance committee, working closely with the board of directors, characteristically has CHAPTER 1 The Role and Functions of Accounting and Finance 9 major responsibility for administering the capital and operating budgets In... growth in income before interest and income taxes is overstated as a 19.4 percent surge, whereas after adjusting for the loss and using a more representative income before interest and income taxes of $563 million (as reported $528 million plus the $35 million loss on disposal of businesses), the adjusted (but more realistic) 1997 growth rate is 11.9 percent 26 PART ONE Accounting and Finance Fundamentals... equipment to form the plastic from its basic ingredients It must buy raw materials It needs workers and salespeople As it manufactures the products, it will have inventories of raw materials, work-in-process, and finished goods It needs funds to obtain the use of the building and equipment, for raw materials, and for manufacturing operations It will need to pay its employees EP finds that it must wait before... cash and working-capital position of the firm, formulates cash budgets, and generally reports on cash flows and cash conservation As a part of this role, the treasurer maintains the firm’s relationships with commercial banks and investment bankers The treasurer is also usually responsible for credit management, insurance, and pension fund management The controller’s core function is the recording and reporting... The Role and Functions of Accounting and Finance 5 Income Statement Sales Costs Net income $200 190 $ 10 From this brief example of the basic financing problems facing a representative operation, we can describe the major decision areas for the firm and the role of finance RESPONSIBILITIES OF FINANCIAL MANAGERS Some key decision strategy areas of the firm include 1 2 3 4 5 Choice of the products and markets .