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Forecasts, budgets, and financial controls help in predicting financial conditions, allocating resources, and monitoring performance to ensure a company’s stability and growth.
Let us consider some companies in the tech industry that have been very successful in managing their finances. Chip designer and artificial intelligence juggernaut Nvidia narrowly topped Microsoft’s market capitalization to become the world’s most valuable public company, less than two weeks after it surpassed Apple’s market cap (2024).[1] Nvidia designs and sells GPUs for gaming, cryptocurrency mining, and professional applications; the company also sells chip systems for use in vehicles, robotics, and more. Nvidia’s Compute and Networking business segment, which includes artificial intelligence (AI), is the company’s biggest revenue generator.
Apple, Nvidia, and Microsoft are the top three global companies by that measure, each with market caps of over $3 trillion. The world’s biggest companies by market capitalization are mainly tech companies, although other sectors, such as energy, financial services, and pharmaceuticals, also make an appearance in the top 10. Most of these companies generate hundreds of billions of dollars in annual revenue and are highly profitable. However, there are a few exceptions, with the focus of investors being on future growth potential.[2]
This chapter covers funding sources, debt and equity financing, key financial statements, and performance evaluation through ratio analysis.
Learning Objectives
After reading this chapter, you should be able to do the following:
- Explore the role of financial management in strategic planning and budgeting for a company’s financial needs.
- Explain the importance of forecasts, budgets, and financial controls to a company’s financial health.
- Differentiate between debt and equity financing options.
- Examine the role of financial and managerial accounting in assessing a business’s financial performance and decision-making.
- Outline the functions of balance sheets, income statements, and statements of cash flows.
- Describe how to evaluate a company’s performance using financial statements and ratio analysis.
- Pesqueno, A. (2024, June 18). NVIDIA is now the world’s most valuable company, topping Microsoft and Apple. Forbes. ↵
- Liberto, D. (2024, October 16). Biggest companies in the world by market cap. Investopedia. ↵
