In this our final lesson, we look at where finance theory gets applied in practice in your typical organization. Let's use this depiction on your screen to represent the finance function of an organization. Now I appreciate in small order manage organizations, finance may be embodied in one or two individuals. In a large organization. These roles are separate and distinct, but regardless of the size of the entity, each of the functions we discuss in this lesson will be covered by one or more people working inside the Office of the CFO. The checkmarks on your screen, indicate the roles that have a heavy finance influence.

Let's work across the finance function, beginning with corporate finance fpn A stands for financial planning and analysis. These are people who can help manage and make better decisions and draw it attention to issues by analyzing transactional data and management reports looking for trends and anomalies. These are people who collaborate with sales, marketing and operations to prepare budgets and forecast activities to enable management to plan and allocate resources more effectively. They're also the ones that update the strategic plans and prepare capital budgets for large projects. You think that finance operations would have a whole lot of finance included in their day to day activities, however, they don't. This is largely the accounting function that processes transactions and prepares financial statements.

Finance does slip in now and again, though, accountants are obsessed with making sure that nothing is overvalued on the financial statements. accountants will use financial analysis to ensure that this does not happen. Also, the activity of processing payables and receivables will directly impact That level of cash flow in the business. This requires a little financial awareness to keep the cash flow tight. By offering customers credit terms that is the ability to buy now and pay later. We are impacting cash flows by deferring the receipt of cash.

Receivables, along with inventory and accounts payable make up a group of accounts called working capital. Working capital is necessary in almost every business to conduct operations. However, working capital itself ties up cash and thus managing it effectively is an important element of Finance. To the right of accounting, we have Investor Relations. This function is typically only seen as a standalone function if the company is a publicly traded entity. However, this function exists to manage the communication with shareholders, analysts and lenders because each of these stages coders are investors seeking a return on their investment.

So it helps that this individual is well versed in finance and can speak that language. Next, let's visit the Treasury Department. These folks manage cash flow. People working in Treasury will focus on estimating the cash coming in, and the requirement for cash going out to ensure that the organization neither runs out of cash, nor does it sit on a large cash balance that could otherwise be deployed to generate a return. When the company needs cash, more cash than it has on hand. The Treasury Department has financing arrangements in place to supply that cash, whether it's a line of credit, or perhaps a longer term source of financing like a mortgage, or even issuing new shares.

Also included here though it could be its own function, its enterprise risk management, risk managers consider all sorts of risks confronting the organization Anything from disaster recovery to health and safety, to fraud to some of the financial risks. We looked at the ways that finance, identify and mitigate those risks in our last lesson. Next, let's look at corporate development. This department often develops the corporate strategy which is different than the corporate finance people who will prepare business strategy. Corporate Strategy is determining how the organization should grow or divest of business operations organically through mergers and acquisitions, through diversification, etc. in this department finance theory has considerable sway mergers and acquisition activities.

Use cash flow analysis and valuation techniques to determine how much a particular business is worth and how much your company can spend to acquire the business or would be willing to receive to divest of the business. Finally, we have the internal audits. auditors and the tax people and typically folks in these departments don't spend much time with finance and the performance of their day to day tasks. Which leaves one last question. What about the rest of the organization? Do other departments need to know Finance?

The answer is absolutely. Whether the managers of these departments have some understanding themselves, or whether they collaborate with those in the finance department. We discussed in this lesson, every facet of business benefits from a financial orientation. embedding a financial perspective and management decision making ensures that better more profitable decisions are made, and that the positive creation of shareholder value that we alluded to during the course introduction is fully achieved. To summarize our final lesson, we learned that finance theory is broadly used across the Office of the CFO. We also talked about that there were many many different facets of finance from analysis to cash management, to valuation, to financing to risk management that are all embodied within the finance discipline.

And finally, that a finance perspective helps improve management decision making. So there you have it, an entire year of finance in one lesson in one hour. How did you do? I hope you follow along with the story and at least at a conceptual level, appreciate how finance adds value to an organization. Keep in mind the finance principles we noted along the way, including that finance and bodies decision relevant analysis, that finance is future oriented. And that finance focuses on cash flow, from forecasting it, to valuing it, to managing it to protecting it, take a drink, you deserve it.

Until next time, I'm Blair cook signing off for now. Goodbye.