3M is one of those rare companies that is more adept than others at creating products, marketing those products, and being financially astute. 3M is the maker of Post-it® notes, Scotch tape, adhesives, sponges, pharmaceuticals, and thousands of other products. 3M’s 2005 annual reports states: “Our new-product pipeline continues to expand significantly. This pipeline is expected to deliver $5.5 billion of total sales over the period 2005 to 2007.” In order to accomplish this track record, 3M’s research and development for these products has to be financed, the design and production funded, and the products marketed and sold worldwide. This process involves all the functions of business.

Did you ever stop to think about the importance of the finance function for a $20 billion multinational company like 3M where 60 percent of sales are international? Someone has to manage the international cash flow, bank relationships, payroll, purchases of plant and equipment, and acquisition of capital. Financial decisions must be made concerning the feasibility and profitability of the continuous stream of new products developed through 3M’s very creative research and development efforts. The financial manager needs to keep his or her pulse on interest rates, exchange rates, and the tone of the money and capital markets.

We strive to maximize shareholder wealth through solid profitable growth and effective use of capital. Specific financial goals are to achieve (1) at least 30 percent of sales from products introduced during the last four years; (2) growth in earnings per share of more than 10 percent per year on average; (3) growth in economic profit exceeding earnings per share growth, and return on invested capital among the highest of industrial companies.

In order to achieve these goals the financial manager must manage 3M’s global affairs and react quickly to changes in financial markets and exchange rate fluctuations. The board of directors and chief executive officer rely on the financial division to provide a precious resource—capital—and to manage it efficiently and profitably. If you would like to do some research on 3M, you can access its home page at www.3M.com. If you would like to understand more about how companies make financial decisions, keep reading.