Financial Management

• FINANCIAL MANAGEMENT

  The process of planning, directing, organizing, controlling and monitoring of the monetary resources in order to achieve objectives and goals of the business.
• KINDS OF BUSINESS ORGANIZATIONS

  (1)         SOLE PROPRIETORSHIP

  (2)         PARTNERSHIP

  (3)         CORPORATION
• GOALS OF THE CORPORATION

  Ultimate Goal: Shareholders’ wealth maximization (stock price maximization)

  Means to an ultimate end goal:  Profit maximization
• FINANCIAL MANAGERS OF THE CORPORATION

  1. Board of Directors (BOD)
  2. Chief Financial Officer (CFO)
• FINANCIAL MANAGERS

  employees who are responsible for managing the monetary resources of the corporation in order to maximize the firm’s value.
• FINANCIAL MANAGERS

  They are also responsible for dealing with the different financial markets and with financial institutions.
• FINANCIAL MANAGERS


  They have the authority to perform investment, financing and operating decisions that will benefit the corporation.
• Board of Directors (BOD)

  They are the direct owners and are elected by the shareholders to manage the corporation.
• Board of Directors (BOD)

  They are charged with ultimate governance of the corporation.
• Chief Financial Officer (CFO)

  Also known as the Vice President for Finance (VP-Finance)
• Chief Financial Officer (CFO)

  Has the responsibility over financial planning and formulation of financial corporate strategies.
• Chief Financial Officer (CFO)

  Under his supervision are the Treasurer and the Controller.
• CONTROLLER(Chief Accountant)

  Main function is related to supervision of record keeping, taxation, reporting as well as processes to attain the objectives of internal control.
• CONTROLLER

  Reporting and Interpreting Data
• Controller

  Tax administration
• Controller

  Government Reporting
• Controller

  Management Audit
• Controller

  Internal Audit
• Controller

  Government Reporting
• Controller

  Economic Appraisal
• Controller

  Protection of Assets
• Controller

  Planning and Controlling
• Treasurer


  Serves as the protector of a company’s value and finances from financial risk that arises from business activities
• Treasurer

  Provision of Capital
• Treasurer

  Investor Relations
• Treasurer


  ST Financing
• Tresurer

  Banking and Custody of Funds
• Treasurer

  Credit and Collections
• Treasurer

  Investments and Insurance
• Controllership

  the practice of the established science of control which is the process by which management assures itself that the resources are procured and utilized according to plans in order to achieve the company’s objectives.
• Treasurership

  concerned with the acquisition, financing and management of assets of a business to maximize the wealth of the firm for its owners.
• GENERAL ROLE OF FINANCIAL MANAGER

  1. Investing Decision
  2. Financing Decision
  3. Operating Decision
• INVESTING DECISION

  • Also known as capital budgeting
  • “What assets should the corporation acquire in order to provide better returns in the future”
  • Acceptance or rejection of investment
• FINANCING DECISION

  • In order to finance the investments, financial managers should raise capital or money through its Financing Activities.
  • ST and LT Financing
  • “How to raise funds in order to finance the investments and operating activities of the firm.”
• OPERATING DECISION

  • “How much funds will be allocated to support the day to day transactions of the firm.”
• RESOLUTION OF AGENCY PROBLEM

  ·     Compensation Plans

  ·     Threats as to change in BOD

  ·     Threats as to Management Takeover

  ·     Legal and Regulatory requirements

  ·     Specialist Monitoring
• CONFLICTS BETWEEN STOCKHOLDERS AND BONDHOLDERS

  o  STOCKHOLDERS – Risk takers

  o  BONDHOLDERS – Risk averse investor
• ETHICAL CONSIDERATIONS

  Ethical behavior builds good reputation that will benefit the organization in the long run.