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Chapter 5 Financial Management
OUTLINE
I. What Is Financial Management
A. Financial management involves systematic planning, monitoring, and
control
B. Planning mainly concerns developing budgets based on revenue history
II. Meeting Financial Goals
A. Financial management is needed not only to maintain fiscal control but
also to meet the expectations of owners and investors
B. One can establish financial goals in many different ways, ranging from
revenue projections to cost-saving methods
III. Implementing Financial Growth
A. The manager works closely with other personnel in administering the
finances of an electronic and digital media business
B. Traditional electronic media enterprises are capital-intensive, consisting of
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department heads what areas of their proposed budgets are being cut or
modified
F. Successful budgets contain a degree of flexibility
G. Budgets also help management to project estimates of future revenues and
expenses
V. Monitoring Financial Performance
A. Managers use different financial statements and reports to monitor
VI. Break-Even Analysis
A. All companies operating for profit must know how much revenue they
need to break even
B. There are two types of costs: fixed costs and variable costs
C. Break-even analysis is easier to understand when presented graphically
VII. Depreciation and Amortization
A. Assets are depreciated according to particular categories that represent the
VIII. Reporting Financial Performance
A. Reporting financial performance is the final step in the cycle of financial
management
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B. Executive summaries are concise reports that one can read quickly to gain
an overview of a firm’s financial progress
ASSIGNMENTS/PROJECTS
1. Ask a manager of a local radio or television station to show the class copies of past
years’ standard financial statements (balance sheet, income statement, and cash flow
statement, etc.) To which does he or she refer most often?—and under what
circumstances? Can he or she give an example of how a recent decision was made
through the analysis of these statements?
2. Use the information in #1 above to calculate the standard ratios covered in the
chapter. What, if any, conclusion can be drawn about the financial condition of this
media operation from this analysis?
3. Create or obtain standard financial statements from media businesses or corporate
MULTIPLE-CHOICE QUESTIONS
1. Which of the following is not true regarding depreciation and amortization?
a. both methods involve writing off the value of assets
b. only fixed assets can be depreciated
2. Which of the following is not an example of an asset?
a. accounts receivable
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accessible website, in whole or in part.
d. cash
*p. 97 e. stock held by the owners
3. Information from ________ is used in preparing the main types of financial
statements used in financial management.
a. income statement
b. general journal
4. Which of the following summarizes the firm’s financial condition at a particular point
in time?
d. profit and loss statement
e. statement of retained earnings
5. Which of the following is not an example of a liability?
d. long-term debt
e. capital stock
6. Which of the following charts a firm’s financial activities over a set period of time?
d. profit and loss statement
e. statement of retained earnings
7. Which of the following statements is true about cash flows?
a. Managing cash flows is difficult.
b. Cash flows determine the value of a broadcast station or cable system.
8. _________ are used to compare firms to their own financial history, to other
companies, or to industry averages.
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a. Income statements
b. Net present value analysis
9. A firm’s ability to convert assets into cash is its
a. leverage
b. present value
10. Which of the following factor is not considered by the manager when he or she
formulates the financial goals?
a. state of the economy (both local and national)
b. technological change
11. Budgeting is usually __________ process in which management projects anticipated
revenues and expenditures
a. a weekly–monthly
b. a monthly
12. Typical journals of monitoring financial performance not include
a. a cash receipts journal
b. cash disbursements journal
13. Which of the following item is not included in the balance sheet?
a. current assets
b. intangible assets
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14. Which of the following item is not included in the statement operations?
d. operating profit
e. none of above
15. Which of the following is not one of the other financial statements to monitor
financial condition besides balance sheet, income statement, and statement of cash
flows?
a. the statement of changes in owner’s equity
b. the statement of retained earnings
TRUE/FALSE QUESTIONS
16. A current ratio and a debt-to-equity ratio can be calculated from a balance sheet, not
an income statement.
17. Capital budgeting is used as a decision tool used by managers when deciding upon
major projects or assets to purchase.
18. Declining value is a depreciation method.
19. A leverage ratio is an indication of a company’s liquidity.
20. Owner’s Equity = Assets − Liabilities
DISCUSSION/ESSAY QUESTIONS
1. A station has a current ratio of .80 and a debt-to-equity ratio of 3. What does this tell
you about the financial condition of this facility?
2. How would a manager use an income statement? What information is found in an
income statement?
4. Explain the concept of break-even analysis and its use in financial management. Give