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The New Principles of Management

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Andrzej Kozminski and Dariusz Jemielniak

The New Principles of Management is a textbook meant for European students of principles of management. Developed basing mainly on international cases as well as drawing from international examples of managerial practices, it attempts to address the needs of globalized companies better than other, typically US-centric textbooks. The New Principles of Management challenges many of the fossilized and outdated management notions and covers the topics most relevant for modern 21st century organizations, rather than their historic developments.

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CHAPTER SEVEN. FINANCIAL MANAGEMENT

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CHAPTER SEVEN FINANCIAL MANAGEMENT 162 Chapter Seven Key terms and definitions Theory Practical tips An overview of financial tools Return on Investment Reporting Case Studies The Golden Apple Tree Iridium LBO Cars for the management Where did these results come from? Financing development The Oil Group Financial management: Crossword Supplementary reading Financial Management “The real measure of our wealth is how much we’d be worth if we lost all our money.” John H. Jowett Key terms and definitions Money has special functions in organizations, in the economy and in society. Without money, no organization can function. Money is: • a universal equivalent, which means that with money it is possible to can buy anything that is for sale. • a measure of value, because it is used to measure the value of property, the obtained revenue, the excess of revenue over costs. In the business world there is a constant play with money and for money. Money is a measure of the value of the winnings or the losses. Money is also one of the most important measures of the success of an entity. Churches, political parties, non-governmental organizations, universities, schools, hospitals and other non-profits should manage their finances to achieve an excess of revenue over costs. The surplus is a measure of their ability to continue functioning. • Accumulation is the collection of savings intended for future ventures or to weather setbacks. In organizations money takes on two forms: resources and flows. The money supply is a liquid resource that can be...

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