Business Finance

• Finance - is a science and art of managing money
• Accounting - recording and keeping function
• What are the types of Finance

  • Public finance
  • Corporate finance
  • Personal finance
• Public Finance - management of country's national budget
• Corporate Finance - management of a company's funding
• Personal Finance - management of one's income, expenses, investments, obligation etc.
• Financial Management within Business Organization - is an entity formed for the purpose of carrying on commercial enterprise (earning profits)
• Sole Proprietorship - consist of one individual doing the business
• Partnership - consists of two or more individuals in business together
• Corporation - one probably dominant form of business organization in the Philippines.
• Corporation - owned by 5 or more persons (stockholders)

  -private owned or public owned
• Shareholder's wealth maximization - main objective of the business/shareholders
• Profitability - measure of the financial performance of a company for a period of time
• Shareholder's wealth is measured based on current market price of the corporation's stock
• What are the factors that influence the Market price?

  • Internal/Controllable by Management
  • Uncontrollable External Factors
• Financial Management - deals with the decision that are supposed to maximize the value of shareholder's wealth
• What are the Corporate Organization Structure?

  • Shareholders
  • Board of Directors
  • President (CEO)
  • VP for Marketing
  • VP for Finance
  • VP for Production
  • VP for Administration
• VP for Marketing - formulate marketing strategies/plans, directing/coordinating company sales, promoting good relationship with customers
• VP for Finance - financing, investing, operating, dividend policies
• VP for Production - Production meets customers demands, minimize production cost, cost competitive
• Financing -decisions how to fund long term investments. determine the appropriate capital structure of the company
• Capital structure - how much of your total assets is financed by debt and how much is financed by equity
• Equity financing - cash from our pockets
• Debt financing - money from our borrowing
• Investing - should choose which type if investment it should invest in that would provide most optimal risk and return trade off
• Operating - determining how to finance working capital amounts
• Dividend Policies - determine when the company should declare such dividends
• Financial Manger - person who takes care of all the important financial functions of an organization
• What are the main functions of a Financial manager?

  • Raising funds
  • Allocation of funds
  • Profit planning
  • Understanding capital markets
• Guiding Principles for Financial Management Systems:

  • Consistency
  • Accountability
  • Transparency
  • Integrity
  • Financial stewardship
  • Accounting standards
• Financial system - performs the essential economic function of channeling funds from those who are investors (savers) to those who need funds (users). In other words, it allows savers of funds to lend funds to users of funds
• Savers/Suppliers of funds - with idle cash/excess cash
• Users/Demanders of funds - those who needs funds/cash
• Private placement - the sale of a new security directly to an investor or group of investors
• Financial market - is an organized forums in which the suppliers and users of various types of funds can make transaction directly
• Financial institutions - intermediaries that channel the savings of individuals, business, and governments into loans or investment
• Financial instruments - real or virtual document representing a legal agreement involving some sort of monetary value
• Derivative instrument - have values determined from underlying assets
• Cash instrument - like deposits and loans, easily transferrable securities
• Assets classes - debt or equity based or FOREX