How Does a CFO Think?

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How Does a CFO Think?
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Financial Issues/Measures for CFOs

• Profitability
• Operating profit margins
• Asset turnover
• ROA (return on assets)
• Leverage/financial structure
• ROE (return on equity)

3
Financial Issues/Measures for CFOs

• Size
• Breakeven volume
• Viability
• Level of living
• Market access

4
Financial Issues/Measures for CFOs

• Growth
• Resources
• Managerial
• Financial
• Sustainable growth rate

5
Economic Value Added (EVA)

• Economic profit
• A measure of value added
• Better than ROE as an indicator of creation of
  value
• Calculation reflects the idea that firm must earn
  enough to cover the cost of debt and the
  opportunity cost of equity before it even begins
  to create value

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Areas of responsibility for CFOs

• Total Financial Resources
• Liquidity
• Leverage
• Profitability
• Cash Flows
• Cost of Capital
• Interest rate
• Dividend payout

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Areas of responsibility for CFOs

• Insurance Coverage and Risk Management
• Financial Planning Procedures
• Working capital
• Capital budgeting
• Accounting Systems and Procedures
• Cost control
• Profit planning
• Business performance
• Auditing

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Areas of responsibility for CFOs

• Capital Structure
• Balance
• Leverage
• Ability to raise capital
• Relationship with Financial Stakeholders
• Tax Considerations and Management

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Areas of responsibility for CFOs

• Inventory Management and Valuation
• Asset Management
• Capital expenditures
• Financial diversification

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Strategic Business Planning for Commercial
Producers