Table of Contents

Chapter 1 - The CFO Position. 1

The CFO Job Description. 1

The Controller Job Description. 2

CFO and Controller Differences. 4

The CFO Organizational Structure. 4

Relations with the Chief Executive Officer. 6

Relations with the Board of Directors. 7

Relations with the Audit Committee and Auditors. 7

Chapter 2 - Strategic Planning. 10

Strategy Overview.. 10

Types of Strategies. 11

Risk Analysis. 12

A Tight Strategic Focus. 13

Pacing. 13

Acquisition Strategy. 14

Outsourcing. 15

The Consideration of Cash in Strategy. 16

Chapter 3 - Risk Management 19

Risk Management 19

The Role of the CFO.. 20

Risk Identification. 21

Risk Quantification Issues. 21

Risk Ranking. 22

The Risk Profile. 24

Risk Planning. 25

Insurance. 26

Data Security Risk. 28

Supply Chain Risk. 29

Political Risk. 30

Foreign Exchange Risk Overview.. 30

Foreign Exchange Risk Management 32

Take No Action. 32

Avoid Risk. 32

Shift Risk. 33

Time Compression. 34

Payment Leading and Lagging. 34

Build Reserves. 34

Maintain Local Reserves. 34

Hedging. 34

Types of Foreign Exchange Hedges. 35

Loan Denominated in a Foreign Currency. 36

The Forward Contract 36

The Futures Contract 37

The Currency Option. 38

The Cylinder Option. 39

Swaps. 39

Netting. 40

Interest Risk Overview.. 41

Interest Rate Risk Management 41

Take No Action. 41

Avoid Risk. 41

Asset and Liability Matching. 42

Hedging. 42

Types of Interest Rate Hedges. 42

The Forward Rate Agreement 42

The Futures Contract 44

The Interest Rate Swap. 46

Interest Rate Options. 47

Interest Rate Swaptions. 50

Risk Management Themes. 51

Chapter 4 - The Control Environment 54

The Genesis of Accounting Controls. 54

The Proper Balance of Control Systems. 55

The Nature of Risk. 56

Control Principles. 57

The Failings of Internal Controls. 58

Preventive and Detective Controls. 59

Manual and Automated Controls. 59

Constructing a System of Controls. 60

Special Case - Acquisitions. 60

Special Case – Employee Turnover. 61

Special Case – Rapid Growth. 61

Special Case – Audit Committee Oversight 62

Control System Documentation. 63

Chapter 5 - Performance Measurement 66

Cash Conversion Cycle. 66

Days Sales in Accounts Receivable. 67

Days Sales in Inventory. 67

Days Payables Outstanding. 68

Free Cash Flow.. 69

Working Capital Productivity. 70

Cash Reinvestment Measurements. 71

Cash Reinvestment Ratio. 71

Funds-Flow Adequacy Ratio. 72

Contribution Margin Ratio. 72

Core Earnings Ratio. 73

Quality of Earnings Ratio. 74

Breakeven Point 75

Margin of Safety. 76

Return on Equity. 77

Return on Assets. 79

Return on Assets. 80

Return on Operating Assets. 81

Affordable Growth Rate. 82

Chapter 6 - Mergers and Acquisitions. 86

Acquisition Strategies. 86

The Failings of Acquisition Strategy. 88

Acquisition Due Diligence. 88

Indicators of a Strong Acquisition Candidate. 93

Acquisition Valuation. 93

Forms of Acquisition Payment 99

The Stock-for-Stock Exchange. 99

The Debt Payment 100

The Cash Payment 101

The Acquisition Legal Structure. 101

Tax Issues. 102

Issues with Stock Purchases. 102

Gain Recognition Avoidance Rules. 103

Type “A” Acquisition. 103

Type “B” Acquisition. 103

Type “C” Acquisition. 104

Triangular Merger 104

Reverse Triangular Merger 105

Asset Purchase. 105

Acquisition Integration. 106

General Integration Concepts. 106

Function-Specific Integration Issues. 106

Integration for the Serial Acquirer 107

Chapter 7 - Budgeting and Forecasting. 110

The Advantages of Budgeting. 110

The Disadvantages of Budgeting. 111

Capital Budgeting Problems. 112

The Command and Control System.. 113

Behavioral Impacts. 113

Bureaucratic Support 114

Information Sharing. 114

The System of Budgets. 115

Operating Decisions Impacting the System of Budgets. 119

The Reasons for Budget Iterations. 120

Alternatives to the Budget 121

Forecasting without a Budget 122

Capital Budgeting. 123

Goal Setting without a Budget 124

Strategy without a Budget 124

Management Guidelines. 125

The Role of Senior Management 126

Compensation without a Budget 127

Behavioral Norms. 129

Profit Knowledge. 129

Information Exchange. 129

Accounting Reports. 130

The Rolling Forecast 131

The Rolling Forecast Format 132

Chapter 8 - Product Pricing. 137

Psychological Pricing. 137

Cost plus Pricing. 138

Dynamic Pricing. 139

Freemium Pricing. 140

High-Low Pricing. 141

Premium Pricing. 142

Time and Materials Pricing. 143

Value Based Pricing. 145

Other Pricing Strategies. 146

Internet Pricing. 147

Price Elasticity of Demand. 148

Cross Price Elasticity of Demand. 149

Non-Price Determinants of Demand. 150

Chapter 9 - Capital Budgeting. 153

CFO Responsibilities. 153

Overview of Capital Budgeting. 155

Bottleneck Analysis. 156

Net Present Value Analysis. 156

The Payback Method. 158

The Outsourcing Decision. 159

The Lease versus Buy Decision. 160

The Post Installation Review.. 161

Chapter 10 - Cash Management 164

The Cash Forecast 164

The Short-Term Cash Forecast 165

The Medium-Term Cash Forecast 168

The Long-Term Cash Forecast 169

The Use of Averages. 169

The Use of Clearing Dates in a Forecast 170

Cash Forecast Reconciliation. 171

The Need for Cash Concentration. 171

Cash Sweeping. 173

The Zero Balance Account 173

Multiple Sweep Arrangements. 174

Manual Sweeping. 174

Sweeping Rules. 174

Sweep Problems. 175

Sweep Costs. 175

Notional Pooling. 177

Notional Pooling Problems. 177

Notional Pooling Costs. 178

Multi-Tiered Banking. 178

Cash Concentration Best Practices. 178

Cash Concentration Alternatives. 179

Chapter 11 - Investment Management 183

Investment Guidelines. 183

Investment Strategy. 185

Repurchase Agreements. 188

Time Deposits. 188

Certificates of Deposit 188

Bankers’ Acceptances. 189

Commercial Paper. 189

Money Market Funds. 189

U.S. Government Debt Instruments. 190

State and Local Government Debt 190

Bonds. 190

The Primary and Secondary Markets. 191

The Discounted Investment Formula. 191

The Effective Interest Rate. 192

Chapter 12 - Fund Raising with Debt 195

Overview of Debt Funding. 195

The Line of Credit 195

The Borrowing Base. 196

Invoice Discounting. 197

Factoring. 198

Inventory Financing. 198

Purchase Order Financing. 199

Leases. 199

The Long-Term Loan. 200

Agency Financing. 200

Other Lending Alternatives. 201

Improving Upon Prepayment Terms. 201

Floating-Rate Notes to Individuals. 201

Debt Covenants. 201

Lender Relations. 203

Debt Risk Issues. 203

Deleveraging. 205

Chapter 13 - Fund Raising with Equity. 207

Overview of Equity Funding. 207

Restricted Stock. 208

Unrestricted Stock. 208

The Accredited Investor. 209

Regulation D Stock Sales. 209

Warrants. 210

Regulation A Stock Sales. 211

Angel Investors and Venture Capital 212

Debt for Equity Swaps. 212

Crowdfunding. 213

Chapter 14 - Credit Rating Agencies. 215

The Credit Rating Environment 215

The Rating Process. 217

Chapter 15 - Going Public and Going Private. 220

Reasons for and Against Going Public. 220

The Initial Public Offering. 221

The Reverse Merger Concept 223

Advantages and Disadvantages of the Reverse Merger. 224

The Price of a Shell 226

Shell Due Diligence. 227

Trading Volume. 227

Other Reverse Merger Issues. 228

Rule 144. 229

The Reverse-Forward Split 229

Going Private. 230

Chapter 16 - Stock Exchanges. 233

Stock Exchange Overview.. 233

The New York Stock Exchange. 234

The NYSE MKT. 235

The NASDAQ.. 236

The NASDAQ Global Select Market 236

The NASDAQ Global Market 237

The NASDAQ Capital Market 238

The Toronto Stock Exchange. 238

Delisting from an Exchange. 240

The Over the Counter Bulletin Board. 240

The Pink Sheets. 241

Chapter 17 - Investor Relations. 243

Investor Relations Overview.. 243

The Earnings Call 243

Guidance. 246

Earnings Smoothing. 248

The Road Show.. 249

The Fund Raising Road Show.. 249

The Non-Deal Road Show.. 249

The Road Show Presentation. 251

Regulation FD.. 252

Short Sellers. 253

Chapter 18 - Public Company Financial Reporting. 257

Interim Reporting. 257

The Integral View.. 257

The Discrete View.. 258

Comparison of the Integral and Discrete Views. 259

Interim Reporting Issues. 259

Segment Reporting. 259

Primary Segment Reporting Issues. 259

The Segment Report 261

Earnings per Share. 262

Basic Earnings per Share. 262

Diluted Earnings per Share. 264

Presentation of Earnings per Share. 267

The Public Company Closing Process. 267

The Form 10-Q.. 268

The Form 10-K.. 270

The Form 8-K.. 272

Chapter 19 - Share Management 278

Float Management 278

Activities to Increase the Float 278

Activities to Delay Stock Sales. 279

The Direct Stock Purchase Plan. 279

The Employee Stock Purchase Plan. 280

Dividend Reinvestment Plans. 280

Stock Splits. 280

Dividend Payments. 281

The Stock Buyback Option. 282

The Stock Repurchase Safe Harbor Provision. 283

Odd Lot Shareholders. 284

Chapter 20 - Information Technology. 287

Types of Information Technology. 287

Technology Ranking Methods. 289

Technology Usage Based on Strategy. 289

Cloud Computing. 290

GRC Software. 290

Enterprise Resource Planning Systems. 291

Sales Force Automation Software. 292

Answers to Chapter Questions. 294

Glossary. 326

Index. 332

 

Final Examination………………………………………………………………………………………………….338