Blog Post 5
Fundamentals of Finance
During week 5 in Business Perspectives, we focused on the fundamentals
of finance. A significant portion of
this week was spent projecting financial statements. In the YouTube lecture, Houston (2020) asks,
“What questions do we face in finance? How do we maximize wealth, what projects
should we invest? How do we raise funds?” (Houston,
2020, 0:2). Inversely, financial
executives need to think of how to mitigate risks. These questions are relevant to all firms,
regardless of their size. “One of the
roles of the financial managers in the firm is to determine the appropriate
allocation of money to various projects, investments, and accounts” (Houston, 2020,
0:17). In the Wall Street Journal
Article, Boughton (2025) stated, “financial executives are stressing the importance
of a steady hand in the C-suite and a clear eyed view of business risks as their
companies confront a thicket of unknowns on tariffs and other policy changes
under the Trump administration” (Broughton et
al., 2025, para. 1). We learned
in lecture, “the top financial manager within a firm is usually the chief financial
officer (CFO), this role is similar to treasurer and controller” (Houston, 2020,
8:45). CFOs and finance teams
are viewed as experts and trusted to ensure the stability of the business's
financial outcome, particularly in light of the uncertainty surrounding the multitude
of tariffs. Significant work is being
done on the backend, focusing on predicting tariffs and the consequences across
supply chain management and risk planning.
The financial team attempts to prepare for the unknown certainty
by increasing risk planning and proceeding with caution due to the unpredictability
of the tariffs. “Finance chiefs said
they were wrestling with whether to take action now to offset tariffs-for
instance, diversifying supply chains, working with suppliers to trim costs or
passing through higher prices to consumers” (Broughton et
al., 2025, para. 6). We learned
from module 4 there are several ways companies can pass on prices to their customers
without the customers knowledge. This
would include unbundling services, shrinkflation, deals, memberships, and
higher quality goods. (Dholakia, 2021).
We learned in lecture that financial decisions must be made
regarding capital budget, long-term investments, capital structure, and capital
management (Houston, 2020).
The finance team will make financial
projections. “You want to be very methodical, very thoughtful in how you change
direction (Broughton et
al., 2025, para. 13). The CFO may need to slow financial management
decisions, including mergers and acquisitions, and the capital budget and
structure. CFO cannot afford to be distracted, “focusing on what is going to
drive the business forward” (Dholakia, 2021,
para. 8) and being transparent with factors out of scope to board
members.
On a personal note, my husband works for a Fortune 500 company
within the financial sector. One of his prominent
roles is predicting the outcomes of the tariffs. He has made numerous projections and
intensified risk planning, often working through sleepless nights to anticipate
the next move and ensure the company's financial security.
References
Broughton, K.,
Maurer, M., & Williams, J. (2025, March 6). Finance executives seek
stability amid erratic tariff shifts. Wall Street Journal. Retrieved
July 1, 2025, from https://www.wsj.com/articles/finance-executives-seek-stability-amid-erratic-tariff-shifts-6d0ddd90?gaa_at=eafs&gaa_n=ASWzDAgOVlKWIcvM4Kn_zj81n7Un0xeUXE3P_2Tv1KzeY5hB0M3aidvAh-WoQek80Vg%3D&gaa_ts=68646981&gaa_sig=csW812UdqFReAa0_sCRMGY8kRvxMwHnLzXff5Pt3rMnk0Gs8PKwJkNh5LvbJh0rOXuMrplUM0elBZ0rw9GuN-A%3D%3D
Dholakia, U. (2021, November 21). How companies
raise prices without raising prices. Wall Street Journal. Retrieved June
24, 2025, from https://www.wsj.com/business/retail/how-companies-raise-prices-without-raising-prices-11637490602?gaa_at=eafs&gaa_n=ASWzDAh7TyCs7N11ENxfEY2t-5025UNZ3IJULsOAJ9igMyEvFl11o18jkueceCZ2R8w%3D&gaa_ts=685abb5d&gaa_sig=HzAvWzwe4LxN-KZ77Soa2CHn236vmcgwpjTLJp-KwOtva3qIjKjoFGM7n69VdGFZzcBoo7hNl1gJpk3WtSzksw%3D%3D
Houston
[Reza]. (2020). Chapter 1 part 1: What is finance? [Video]. https://www.youtube.com/watch?v=nG8seDzxT_w
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