Organizational

Chart and the

Roles of the
VP Finance
 Shareholders

Board of Directors
Organization
al Chart
President

VP for Sales & VP for VP for VP for

Marketing Finance Production Administration

Treasury or
Accounting
Finance
Department
Department
Board of Directors
The highest policy-making body in a
corporation.
 4

○ The board’s primary responsibility is

Board of to ensure that the corporation is
operating to serve the best interest
Directors of the stockholders.
○ Elected by the shareholders
○ Owning majority of the shares
means having the right to elect
majority of the directors in the
board.
 5

1. Setting policies on investments,

Responsibiliti capital structure, and dividends
es of the 2. Approving the company’s
BOD strategies, goals and budgets
3. Appointing and removing members
of the top management
4. Determining top management’s
compensation
5. Approving the information and
other disclosures reported in the
financial statements
Jose T. Sio
Chairman of the
Board
SM Investments
Corp.
Former CFO of SM
Investments Corp,
he replaced
Chairman
Emeritus, Henry Sy.
 Kim
Min-Kyu
Chairman of the
Board,

KM Financial
 President
Chief Executive Officer (CEO)
 10

1. Overseeing the operations of a

Responsibiliti company and ensuring that the
es of the strategies as approved by the
President board are implemented as
planned.
2. Performing all areas of
management: planning, organizing,
staffing, directing and controlling.
3. Representing the company in
professional, social and civic
activities.
Frederic C.
DyBuncio
CEO, SM
Investments
Corp.,
 Mark
Zuckerber
g
Chairman of the
Board and CEO of
Facebook Corp.,
 Ernesto
Tanmantiong
CEO of Jollibee
Foods Corp.,
 Sundar
Pichai
CEO of Google
Inc.,
VP for Sales and
Marketing
 1. Formulating marketing strategies
and plans
Responsibiliti 2. Directing and coordinating
es of the VP company sales
for Sales and 3. Performing market and competitor
Marketing analysis
4. Analyzing and evaluating the
effectiveness and cost of
marketing methods applied
5. Conducting research and
development for new marketing
opportunities
6. Promoting good relationships with
customers and distributors.
 VP for
Production/Operations
Chief Operating Officer (COO)
 1. Ensuring production meets
customer demands
Responsibilitie 2. Identifying production
s of the technology/process that minimizes
VP for production and makes the
Production company cost competitive
3. Coming up with a production plan
that maximizes the utilization of
the company’s production facilities
4. Identifying adequate and
competitively priced raw material
suppliers
VP for Administration
 1. Coordinating the functions of
administration, finance and sales
Responsibilitie and marketing departments
s of the 2. Assisting other departments in
VP for hiring employees.
Administration 3. Providing assistance in payroll
preparation
4. Determining the location and the
maximum amount of office space
needed by the company
5. Identifying means, processes, or
systems that will minimize the
operating costs of the company.
VP for Finance
Chief Financial Officer (CFO)
 22

○Has four functions

VP for
○Operating
Finance ○Investing
○Financing
○Dividend Policies
Operatin
g
decisions
It deals with daily
operation of the
company. The VP
for finance
determines how to
finance working
capital accounts
such as AR and
Inventories
 24

○ Will he use short-term investments /

loans to finance. Yes, if, approved by the
Notes BOD, the company is aggressive
enough.
○ Short-term sources of funds are
cheaper, lower interest rates. Can
boosts the profitability of the company.
○ However, the ideal setup is financing
the working capital accounts with long-
term sources.
Investing
Decisions
Deals with
decisions
regarding long-
term investments
supported by
capital budgeting
analysis.

Usually deals with

Noncurrent assets
 26
○ Capital budgeting analysis – a technique
used to determine the financial viability of
a long-term investment.
○ Requires forecasting the cost of
Notes
investment and the streams of cash flows
expected to be be generated from the
investment.

○ This function is crucial because many

companies suffered from financial distress
because of aggressive expansion financed
by debt.
○ Metro Pacific Corp and Belle resources.
Financing
Decisions

The VP for Finance is responsible for

determining the appropriate capital
structure of the company, that is, how much
of the total assets should be financed by
debt and equity.
 28

Capital intensive companies

Notes • Characterized by high-fixed operating
expenses. Financed more by equity.
• if these companies are heavily financed
by debt, then interest expense adds up
to the already high-fixed operating
expenses. Higher requirement for
revenues.
 Dividends – distribution of a portion of a
company’s earnings, decided by the
board of directors, paid to a class of its
Dividend shareholders usually in the form of cash
Policies Two conditions must be met before
declaring dividends:

1. The company must have enough

retained earnings to support cash
dividend declaration.

2. The company must have cash.

 Factors to consider in
declaring cash dividends:
Dividend 1. Availability of investment
Policies opportunities
2. Access to long-term sources
of funds
3. Capital structure
 31

Availability of investment opportunities –

SME’s may be open to expansion, so instead of
declaring dividends, they would invest on
Notes expansion.

Access to long-term funds –Publicly listed

companies have better acccess to long-term
sources of funds

Capital structure – capital intensive companies

have to be more conservatively financed.
 Investing Decisions

1. Non-current asset
acquisition
2. Investment portfolio
3. Pricing decisions of Financing Decisions
Operating Decisions
stocks and bonds
4. Discounted cash flow 1. Equity financing
1. Credit and collection
analysis in capital 2. Debt financing
2. Level of inventory
budgeting 3. Cost of capital and
3. Granting of discounts
4. Budgeting borrowing
5. Payment and control 4. Short-term and
of operating long-term borrowing
expenditure 5. Interest rate
6. Daily operating
decisions
 33

“Yesterday’s solutions are

never adequate for the
future”
-Albert De
Larrazabal
CFO, Globe Telecom
“It’s very exciting because you
are not just thinking of today
but what the company will
need in the future”
-Ysmael V. Baysa
CFO, Jollibee Foods Corp.,
“Now, we don’t go out
because we need funds.
We go out because it’s an
opportunity”
-Jose T. Sio
Chairman of the Board
SM Investments Corp.
 Assignment:
(To be checked on Friday, Jan. 26, 2018)
1. Identify and describe the financial information that
can be found in the following financial statements:
a) Statement of Financial Position
b) Statement of Financial Performance
c) Statement of Cash Flows
d) Statement of Changes in Stockholder’s Equity
2. Name the different steps in preparing financial
statements (9 steps)
3. What do you mean by the “going concern
assumption”?