INTRO TO FINANCIAL MANAGEMENT Considerations in Finance

Financial Management: Personal Business

 Acquisition of funds, optimum methods of employing the funds Goals Goals
 Handled by the financial manager Lifestyle Assets
 Start w/ a plan Employment Liabilities
o Prospective – needs to be planned; future. Wealth transfer Funds
Roles of a Financial Manager Retirement Income
Inheritance Expenses
 Treasurer (financing)
Insurance Taxation
o In-charge of the raising of capital
Loans Investments
o Deals w/ cash management and relationships w/ banks and financial institutions
health Wealth management
o Front-office in nature
Common denominator: goals – if you don’t know your destination, you wouldn’t know
 Controller (investing) if you have arrived
o Often interchanged w/ comptroller
o Deals w/ taxes, accounting, financial reporting and budgeting Decisions in Finance
o Back-office in nature Capital budgeting Financing
 CFO How to raise money to pay for
o Chief Finance Officer Which assets to acquire?
instruments and disbursements?
o Oversees the treasurer and controller and sets the overall financial strategy Controller’s role Treasurer’s Role
o Head of the finance or accounting department of an organization
Users of Financial Information Terminologies in Finance
 Internal  Financial institutions – engaged in the world of finance: banks, pawnshops, money
o Shareholder, employees, management changers, remittance agents, mutual funds companies, insurance companies.
 External o Financial intermediation – pumapagitna yung banks sa mga gustong
o Lenders, government agencies, suppliers, investors, finance entities, customers, mangutang and magsave/deposit in the most safe and secured way.
public  Financial investments – instruments na pwedeng palaguin; instruments used for
Basic Procedures in Finance investments: stocks, bonds, mutual funds
 Planning (CFO) – setting of strategies  Financial markets – place where buyers and sellers of financial instruments meet: PH
 Raising (Treasurer) – raising of funds stock exchange, Foreign exchange market
 Investing (Controller) – deals w/ budgeting Funds of an organization
 Monitoring – right and wrong  Internal (stocks) – treasurers can raise funds internally by issuing stocks
Steps in Project Evaluation o Investors to shareholders
 Analyze the data/information provided in the proposal – expansion of business,  External (bonds) – bonds are proof of debt; magkakautang ka sa mag-iinvest sa bonds,
opening of branches in effect magiging lenders.
 Apply financial tools and techniques – payback period: after ilang years mababawi ang
investment?
 Assess your findings – is it worth the undertaking?
 Make the decision – turn it down, make amends, modify
 Implement PRIM
INTRO TO MANAGERIAL FINANCE  Short-term financial management decision – the management of short-term assets
Managerial Finance: and liabilities such as cash, inventory, and short-term loans (Current assets & current
 Deals w/ financial decision in the business organization liabilities).
 Decision-making aimed at obtaining and allocating the firms scarce financial capital so as Decision-makers of the Corporation
to maximize stockholder’s wealth  Board of Directors
What does managerial finance address?  CEO (Chairman of the Board)
 What investment the firm should make?  COO (President)
 What type of financing should be used to pay for the investment?  Vice President
 How should daily financial activities be managed to satisfy cash requirements?  VP – Finance (CFO)
Types of decision  Treasure
 Strategic decision – long-term: 5 years; set of decisions resulting in the formulation and  Controller (Chief Accountant)
implementation strategies or plans designed to achieve the objectives of the organization; Conflicts of Interest in Corporations
 Tactical decision – short-term; set of decisions designed to carry out daily activities to  Bondholder vs Stockholder
meet strategic objectives. o Bondholders wish to minimize risks as they want the corporation to at least
Fundamental Goal of the Firm maintain its financial position
 Maximization of shareholder wealth – that is to maximize the value of the resources o Discourage the company from taking on high risks or paying high dividends or
that stockholders have committed to the firm. entering heavy debts
 Basically means VALUE – “…is represented by the market price of the firm’s common  Stockholders vs Management
stock, which in turn, is a function of the firm’s investment, financing, dividend decisions.” o Also known as Principal vs Agent
– this should be seen by the demand of people in buying stocks. A = L + C o Stockholders wish to maximize the value of equity /stock price
o As long as the value of Capital increases, the shareholder’s wealth is maximized. o Managers wish to maximize their own welfare (personal agenda)
o Return on Equity Ethical and Social Issues in Stockholder Wealth Maximization
Benefits of Maximizing Shareholder Wealth  Distinction between investments, speculations, and gambling.
 Direct benefit to shareholders through profit maximizations  Insider-trading – prior information that would give you an undue advantage to earn
 Societal benefits as business compete to create wealth
 Includes effect of all financial decisions TIME VALUE OF MONEY
What is Profit Maximization? “The value of your peso today is worth more than the value of the peso you receive tomorrow.”
 Stresses the efficient use of capital resources What is an interest?
 Not specific to time frame for profits to be measured  Simple – interest earned only on the original earned investment
 Goals are not precise, allow for misinterpretation  Compound – interest earned on interest
Activities of a Financial Manager Future Value – amount to which an investment will grow after earning interest.
 Investment decision – how to evaluate and choose the best alternative projects Present Value – value today of a future cash flow
 Financing decision (treasurer) – the FM asks themselves should the firm issue stocks Double your money – investment adviser may promise to double your money; will never
(equity) or bonds (debt) to provide the needed resources? Should the firm borrow short- happen in reality.
term or long-term? Annuities – equally spaced level stream of cash flows
 Dividends policy decision – the FM recommends to the BOD how much of the remaining  Ordinary Annuity – payments are made at the end of each period
cash flow should be distributed as dividends and how much of the firm should keep  Annuity Due – payments are made at the beginning of each period
reinvest in new project. Perpetuities – stream of level of cash payment that never ends
FINANCIAL STATEMENT ANALYSIS 3. Balance Sheet:
Users of financial Information: a. Assets
 Internal: b. Liabilities
o Employees c. Equity/Capital
o Management Presented in 2 forms:
o Shareholders Account Report
 External CA CL A
o Government NCA NCL L
o Creditors E E
o Investors 4. Statement of Cash Flow
Financial Statements a. Operating – normal course of business and short-term; CA & CL, INCOME & EXPENSE
Statement of Financial Statement of Comprehensive (inventory – if the problem is silent, current. If not, it follows the normal course of
Income Statement business)
Performance Income
Balance Sheet Statement of Financial Position b. Investing – long term; NCA; may pera
Cash Flow Statement of Cash Flows c. Financing – liabilities and capital; NCL & E. (debt & equity securities); walang pera
Changes in Owner’s Equity Capital Statement Stockholder’s Equity 5. Notes to FS: disclosure; covers all financial statements
Notes to FS
⋆ Partnership: permanent; joint venture: temporary Criteria in Analyzing FS:
 Liquidity – ability of/how fast an entity to convert asset into cash
 Adjusting Items:  Solvency – ability of a company to settle obligations when they’re due
o Accrued expense – recognized expense when incurred regardless the time it was paid. o Leverage – if the liability is 50% of its asset ⎯ highly leverage
o Accrued income – recognized income when earned regardless the time it was earned.  Profitability – capacity to earn income; Return on Assets & Return on Equity
o Prepaid expense  Stability – capacity to expand; stable if the company is liquid, solvent and profitable.
o Deferred income - ⇾earned? Services ⇾ rendered; product ⇾ delivered.
o Depreciation ⋆ Is it possible that a company is not profitable but liquid? YES, there are still assets to be
o Allowance for doubtful accounts – direct write-off: no allowance for doubtful acct converted.
1. Income Statement: ⋆ Materiality – if the amount is significant that it will greatly affect decision-making;
a. Revenue/Income materiality depends on company; 5% - default.
b. Expenses
c. Net Profit/Loss Different techniques to Analyze FS
d. Gains & Losses  Horizontal – year on year comparison of the values of accounts
e. Extra-ordinary items A B C (A-B) D (C/B)
Gain Revenue/Income Account Title 2021 Any prior year Amount change % change
Unusual Normal operation of business o B – base year
2. SOCE/Stockholder’s Equity  Vertical – comparison of 1 account title w/ another
a. Capital (beg. & end.)  Ratio – use of re-established formula to assess FS
b. Withdrawals
c. Additional Investments ⋆ Utilities Expense: Water, Electricity, Internet, Cable, Telephone
d. Net Profit/Loss
LIQUIDITY RATIOS: PROFITABILITY RATIOS:

𝑵𝒆𝒕 𝑾𝒐𝒓𝒌𝒊𝒏𝒈 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 = 𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕𝒔 − 𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔 𝑵𝑰𝑨𝑻

𝑹𝒆𝒕𝒖𝒓𝒏 𝒐𝒏 𝑨𝒔𝒔𝒆𝒕𝒔 =
𝒂𝒗𝒆𝒓𝒂𝒈𝒆 𝒂𝒔𝒔𝒆𝒕𝒔
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕𝒔
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒓𝒂𝒕𝒊𝒐 =
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔 𝑵𝑰𝑨𝑻
𝑹𝒆𝒕𝒖𝒓𝒏 𝒐𝒏 𝑬𝒒𝒖𝒊𝒕𝒚 =
𝒂𝒗𝒆𝒓𝒂𝒈𝒆 𝒆𝒒𝒖𝒊𝒕𝒚
⋆ Is anything below 1 bad? Depends on industry, those who sells jewelries and land are hard
to sell, normally mababa yung current ratio, but once na makabenta sila, Malaki yung cash 𝑮𝒓𝒐𝒔𝒔 𝑷𝒓𝒐𝒇𝒊𝒕
inflow. 𝑮𝒓𝒐𝒔𝒔 𝑷𝒓𝒐𝒇𝒊𝒕 𝒓𝒂𝒕𝒊𝒐 =
𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔

𝒄𝒂𝒔𝒉 + 𝒎𝒂𝒓𝒌𝒆𝒕𝒂𝒃𝒍𝒆 𝒔𝒆𝒄𝒖𝒓𝒊𝒕𝒊𝒆𝒔 + 𝒂𝒄𝒄𝒐𝒖𝒏𝒕𝒔 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆 𝑵𝑰𝑨𝑻 − 𝒑𝒓𝒆𝒇𝒆𝒓𝒓𝒆𝒅 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔

𝑸𝒖𝒊𝒄𝒌 𝒓𝒂𝒕𝒊𝒐 = 𝑹𝒆𝒕𝒖𝒓𝒏 𝒐𝒏 𝑪𝒐𝒎𝒎𝒐𝒏 𝑬𝒒𝒖𝒊𝒕𝒚 =
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒆𝒔 𝑨𝒗𝒆. 𝒐𝒇 𝑶𝒓𝒅𝒊𝒏𝒂𝒓𝒚 𝑺𝒉𝒂𝒓𝒆𝒔

𝒄𝒂𝒔𝒉 MARKET-VALUE RATIOS:

𝑪𝒂𝒔𝒉 𝒓𝒂𝒕𝒊𝒐 =
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔 𝒎𝒂𝒓𝒌𝒆𝒕 𝒑𝒓𝒊𝒄𝒆
𝑷𝒓𝒊𝒄𝒆 𝒕𝒐 𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝒓𝒂𝒕𝒊𝒐 =
𝒆𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆
SOLVENCY RATIOS:
𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆
𝒕𝒐𝒕𝒂𝒍 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔 𝒚𝒊𝒆𝒍𝒅 =
𝑫𝒆𝒃𝒕 𝒓𝒂𝒕𝒊𝒐 = 𝒎𝒂𝒓𝒌𝒆𝒕 𝒑𝒓𝒊𝒄𝒆
𝒕𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕𝒔

𝒕𝒐𝒕𝒂𝒍 𝒄𝒂𝒑𝒊𝒕𝒂𝒍 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆

𝑬𝒒𝒖𝒊𝒕𝒚 𝒓𝒂𝒕𝒊𝒐 = 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔 𝒑𝒂𝒚𝒐𝒖𝒕 =
𝒕𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕𝒔 𝒆𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆

𝒕𝒐𝒕𝒂𝒍 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔 𝒅𝒆𝒄𝒍𝒂𝒓𝒆𝒅

𝑫𝒆𝒃𝒕 − 𝒆𝒒𝒖𝒊𝒕𝒚 𝒓𝒂𝒕𝒊𝒐 = 𝑷𝒂𝒚𝒐𝒖𝒕 𝒓𝒂𝒕𝒊𝒐 =
𝒕𝒐𝒕𝒂𝒍 𝒄𝒂𝒑𝒊𝒕𝒂𝒍 𝑵𝑰𝑨𝑻

𝑪𝒂𝒔𝒉 𝒇𝒍𝒐𝒘 𝒓𝒆𝒕𝒂𝒊𝒏𝒆𝒅 𝒆𝒂𝒓𝒏𝒊𝒏𝒈𝒔

𝑪𝒂𝒔𝒉 𝒇𝒍𝒐𝒘 − 𝒅𝒆𝒃𝒕 = 𝑷𝒍𝒐𝒘𝒃𝒂𝒄𝒌 𝒓𝒂𝒕𝒊𝒐 =
𝒕𝒐𝒕𝒂𝒍 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔 𝑵𝑰𝑨𝑻

𝑬𝑩𝑰𝑻 𝑮𝒓𝒐𝒘𝒕𝒉 𝒊𝒏 𝑬𝒒𝒖𝒊𝒕𝒚 𝒇𝒓𝒐𝒎 𝑷𝒍𝒐𝒘𝒃𝒂𝒄𝒌 = 𝒑𝒍𝒐𝒘𝒃𝒂𝒄𝒌 𝒓𝒂𝒕𝒊𝒐 𝒙 𝑹𝑶𝑬

𝑻𝒊𝒎𝒆𝒔 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒆𝒂𝒓𝒏𝒆𝒅 =
𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒑𝒂𝒚𝒎𝒆𝒏𝒕𝒔
𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔 𝒅𝒆𝒄𝒍𝒂𝒓𝒆𝒅
𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅′ 𝒔 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆 =
𝒐𝒖𝒕𝒔𝒕𝒂𝒏𝒅𝒊𝒏𝒈 𝒔𝒉𝒂𝒓𝒆𝒔

𝒔𝒕𝒐𝒄𝒌 𝒑𝒓𝒊𝒄𝒆
𝑴𝒂𝒓𝒌𝒆𝒕 𝒕𝒐 𝑩𝒐𝒐𝒌 𝒓𝒂𝒕𝒊𝒐 =
𝒃𝒐𝒐𝒌 𝒗𝒂𝒍𝒖𝒆 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆
ACTIVITY/TURNOVER RATIOS: MIDTERMS QUIZ

𝑪𝒓𝒆𝒅𝒊𝒕 𝑺𝒂𝒍𝒆𝒔 1. Stability is equivalent to Growth. F, stability is a factor of growth.

𝑨𝑹 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝒂𝒗𝒆𝒓𝒂𝒈𝒆 𝑨𝑹 2. Times interest earned covers interest expenses in both the numerator and denominator of the
formula to ensure solvency in paying debts on these interests. F, numerator excludes interest.
𝑪𝑶𝑮𝑺 3. Income Statement is the same as Statement of Comprehensive Income. F, SoCI includes other CI
𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝒂𝒗𝒆𝒓𝒂𝒈𝒆 𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 4. A user of financial information may all fall under public, if considered external. F, not all
5. Liquidity is the ability of a company to generate cash in a short period of time. T
𝑪𝒓𝒆𝒅𝒊𝒕 𝑷𝒖𝒓𝒄𝒉𝒂𝒔𝒆𝒔 6. The difference between ROA and ROE lies on the amount for which net income after tax is
𝑨𝑷 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝒂𝒗𝒆𝒓𝒂𝒈𝒆 𝑨𝑷 compared to. T
7. Activity ratios, including turnovers, define the efficiency of a company relative to its normal
𝑪𝑶𝑮𝑺 + 𝑶𝑷 𝑬𝒙𝒑 (𝒆𝒙𝒄𝒍𝒖𝒅𝒆: 𝒅𝒆𝒑𝒓𝒆𝒄𝒊𝒂𝒕𝒊𝒐𝒏)
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑨𝒔𝒔𝒆𝒕 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 = operating cycle components. T
𝒂𝒗𝒆𝒓𝒂𝒈𝒆 𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕
8. Du Pont Analysis breaks down an activity, profitability, and solvency formula to compute for
earnings from capital. T
9. The use of 360 days is known as the Banker's method in computing interest. T
PERIODS: 10. Operating expenses such as utilities, rent, depreciation, and salaries are included in the
computation of Current Asset Turnover. F, depreciation is excluded
𝟑𝟔𝟎 11. Only sales that are on credit maybe divided by total accounts receivable to compute for AR
𝑨𝑹 𝒑𝒆𝒓𝒊𝒐𝒅 = turnover. F, average AR
𝑨𝑹 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓
12. Price to earnings measure how much the market believes in the potential earnings of the
𝟑𝟔𝟎 company. F
𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝒑𝒆𝒓𝒊𝒐𝒅 =
𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 13. Cash basis accounting relies entirely on the payment and receipt of cash. T
14. Credits always reduce account balances. F, liabilities, equity and income accts’ normal
𝟑𝟔𝟎 balance is credit
𝑨𝑷 𝒑𝒆𝒓𝒊𝒐𝒅 =
𝑨𝑷 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 15. Cash Conversion Cycle includes inventory period and AR turnover for it to be computed. T
16. Going Concern is a concept where accountants assume that the business will continue to operate
for a foreseeable future. F, unforeseeable
17. If Average assets and capital are 900,000 and 540,000, respectively, with an ROE of 0.046, how
CASH CONVERSION CYCLE: covers/includes inventory period and AR turnover. much is the net income before tax of the company? Assume 20% corporate tax.

ROE = 0.046
AVERAGE CAPITAL = 540,000
AVERAGE ASSETS = 900,000
NET INCOME AFTER TAX (540,000*0.046) = 24,840

NIBT (24,840/80%) = 31,050

18. If additional investment of the owner is P650,000, payment of utilities of P5,000 and payment 20. One fifth of the retained earnings, which composed half of the company's equity, were declared
of long-term loan to the bank is P700,000, Supplies amounting to 12,000 were purchased on as dividends. With a 50% debt ratio and 2,000,000 worth of capital, Operating profit margin is
account, while inventory of 8,000 under long-term liabilities were paid with cash after the close 10% with Net Sales of 8,000,000 and sales returns of 2,000,000. How much is the payout ratio
of the calendar year. How much is the net cash increase or decrease from financing activities? of the company? (show computations)
(show computations)
CAPITAL = 2,000,000
650,000 DIVIDENDS DECLARED (2,000,000*1/2*1/5) = 200,000
(700,000) OPM = 10%
(50,000) or decrease of 50,000 NET SALES = 8,000,000
NET INCOME (8,000,000*10%) = 800,000
19. The company's Cost of Goods Sold is 190,000 and net purchases (with terms 2/10, n/30) is at
PAYOUT RATIO (200,000 / 800,000) = 25%
220,000. An increase of 20% on inventory and accounts were seen from the previous year. All
liabilities are current and capital ratio is 70% of 1,000,000 total assets. What is the AP period of
this company? (show computations) 21. Company's balance sheet showed Cash (100,000), Accounts Receivables (80,000), Cash
Equivalents (90,000), Inventory (15,000) with Unearned income of 75,000. How much (in
CAPITAL RATIO = 70% percent) is the difference between the two computations of Quick Ratio using the given data?
TOTAL ASSETS = 1,000,000 (show computations)
TOTAL CAPITAL (1,000,000 * 70%) = 700,000
TOTAL LIABILITIES (1,000,000 – 700,000) = 300,000 (100,000+90,000+80,000)/75,000 = 360%
NP = 220,000 (100,000+90,000+80,000+15,000) – 15,000/75,000 = 360%
INCREASE = 20%
AP2 = 300,000
NO DIFFERENCE
AP1 = (300,000/120%) = 250,000
AVERAGE AP ((250,000+300,000)/2) = 275,000
AP TURN OVER (220,000/275,000) = 80%

AP PERIOD (360/80%) = 450 days

 PRELIM EXAM 21) On its first year, a 12% interest on 50,000 loan shall be THE SAME FOR BOTH SIMPLE AND
COMPOUND INTEREST
1) I. Financial Management deals with acquisition of funds and optimum methods of employing the
22) ABC University offers a lifetime annuity to retiring professors. For a payment of 800,000 at age
funds. F
65, the school will pay the professor 60,000 pesos until death. If such payment may be passed
II. The decision to acquire funds to purchase the assets is a Capital Budgeting decision. T
on to his relatives after his death, what is the rate of annuity? 7.5%
2) Annuity due AVAILABLE FOR BOTH PV AND FV
23) Paying in cash, rather than in installment is MOSTLY AVOIDED DURING THE PANDEMIC
3) I. Simple interest is always lower than compound interest. F
24) In the formula for Perpetuity, C means CASH PAYMENT
II. The peso you receive today is worth more than the peso you receive tomorrow. T
25) I. Short-term financial decision includes cash and inventory. T
4) I. Only governments may issue perpetuity. F
II. Bondholders are more aggressive than stockholders, since they want their interests paid. F
II. An additional (1+r) is added in the formula to change annuity to annuity due. T
(STOCKHOLDERS ARE MORE AGGRESSIVE, BONDHOLDERS ARE NOT RISK-TAKERS)
5) The role of a Financial Manager that deals with cash management. TREASURER
26) Mr. G wanted to save 50,000 for a new phone. However, he is estimating how long will it
6) I. A long-term decision is mostly a projection of more than 5 years. T
normally take him to save if he wanted to start with the lowest possible amount. Which time
II. Management wishes to maximize the firm’s welfare. F (stockholder’s wealth/own welfare)
frame will be the best option for him? 10 YEARS
7) Set of decisions designed to carry out daily activities and meet long-term objectives. TACTICAL
27) This is represented by the market price of the firm’s common stock, which, in turn, is a function
8) Which is the broadest among the following? BUSINESS FINANCE
of the firm’s investment, financing, dividend decisions. VALUE
9) Which is not part of the basics of Finance? IMPLEMENTING (I in PRIM – INVESTING)
28) Mrs. N, during the pandemic, engaged in a double-your-money scheme. For her to double her
10) Conflicts of interest in a corporation does not primarily involve. EMPLOYEES
5,000, what is the rate that must be prevailing? NOT ENOUGH INFORMATION TO DECIDE
11) Present Values are always computed using compound interest. YES, BECAUSE COMPOUNDING
29) I. Insider trading is an Agent-Principal problem. F
IS THE APPROACH IN TIME VALUE OF MONEY
II. Corporate Governance is composed of more than one principle. T
12) I. Comptroller is also known as Chief Accountant. T
30) The following are decision makers in the finances of the corporation, EXCEPT CCO
II. Internal funds of the organization usually come from issuance of stocks. T
13) Future value of multiple cash flows. SHALL BE COMPUTED USING FV OF A CASH FLOW
14) An equally spaced level of cash flows. ANNUITY
15) A consideration which can be observed on both personal and business finance is GOALS
16) You will require 70,000 in 5 years. If you earn 6 percent on your funds, how much will you need
to invest today in order to reach said goal? 52,308
17) You deposit 100,000 in your bank If the bank pays 4 percent interest, how much will you
accumulate in 10 years if it is compounded twice a year? 219,112
18) During the Spanish era, Ms. A purchased a lot in Tagaytay worth 10,000 pesos back then. After
100 years, the land maybe sold for 350,000. With a prevailing rate of 3.5%, did she make the right
decision to purchase it? YES, SHE MADE THE RIGHT DECISION
19) I. Annuities are applicable to investments and not on loans. F
II. Interest rates are always the same in the long-run. F
20) I. Partnership maybe formed by two to fifteen people by mere agreement, whether oral or
written. F (TWO OR MORE)
II. A service business may also be considered a manufacturing business when it buys and sells. F
 MIDTERM EXAM 16) Using the Merchant's Rule, if the GP ratio of the company is 50%, its Sales amount to 2,336,000, and
their inventory of 40,000 increased to 300%, compute the average sale period.
1) Ratio analysis formula can be applied in Static analysis. T
Cutting unnecessary costs can be achieved through FS analysis. T GROSS PROFIT (2,336,000*.5) = 1,168,000
2) Stability may result to expansion. T INV1= 40,000
Times interest earned covers interest expenses in both the numerator and denominator of the INV2 (40,000*300%)= 120,000
formula to ensure solvency in paying debts on these interests. F (numerator excludes interest) AVE INV (40,000+120,000/2) = 80,000
3) The Capital Statement is analyzed using ROE since E stands for Equity. F COGS (2,336,000-1,168,000) = 1,168,000
Liquidity is the ability of a company to generate cash in a short period of time. T INVTO (1,168,000/80,000) = 14.6%
4) Fixed assets turnover is computed by dividing total fixed assets from Sales. F (S/NET FIXED ASSETS)
Proceeds from sale of equipment used everyday by the computer shall be under operating activities.
AVERAGE SALE PERIOD (365/14.6%) = 25 DAYS
F (INVESTING)
5) Du Pont Analysis breaks down an activity, profitability, and solvency formula to compute for earnings
from capital. T 17) Company's balance sheet showed Cash (100,000), Accounts Receivables (80,000), Cash Equivalents
The use of 360 days is not known as the Banker's method in computing interest. F (90,000), Supplies (7,500), Inventory (15,000) with Unearned income of 75,000. How much (in
6) Accrual basis of accounting recognized expenses when incurred regardless of when cash is received. percent) is the difference between the two computations of Quick Ratio using the given data (in
F (REGARDLESS OF WHEN IT IS INCURRED) percent, round off to 2 decimal points)?
The indirect method of cash flow analysis starts with beginning cash. F (NET INCOME)
7) Trend analysis also uses a base year to apply its formula. T (100,000+80,000+90,000+7,500+15,000)-15000/75,000 = 370%
Cash Conversion Cycle includes inventory period and AR turnover for it to be computed. T 100,000+80,000+90,000/75,000 = 360%
8) When computing for compound interest, Rate of interest per period must always be in decimal. F
[1/(1+i)n] is the computation for discount factor. T 370%-360% = 10%
9) The time value of money demonstrates that, all things being equal, it is better to have money now
rather than later. T
18) Mrs. N, during the pandemic, engaged in a double-your-money scheme. For her to double her 5,000
Interest on interest is the concept of compounding but not of simple interest. T
in 8 years, what is the rate that must be prevailing?
10) Dividend declaration, unlike Retained Earnings, is a way to dispose surplus. F
Only merits, excluding demerits, determine source and period of financing. F
11) Whether to carry out a takeover or a merger involving another business is a disinvestment decision. PV = 5,000
F FV = 10,000
The identification of the possible strategies capable of maximizing an organization’s net present value T=8
is a component of Financial Strategy. T
12) An annuity is a cash flow, whether incoming or outgoing. T P = A/(1+i)^n
Investment decisions excludes investment in fixed assets (called as capital budgeting). F (INCLUDES) 5,000 = 10,000/(1+i)^8
13) Non-profit organization are under Public Finance. F 5,000(1+i)^8 = 10,000
Public finance also includes the State and GOCCs. T 5,000(1+i)^8/5,000 = 10,000/5,000
14) Profit planning may include analyzing FS using ratios under Profitability and Solvency. T (1+i)^8 = 2
Once the funds are raised through different channels the next important function is to allocate the
(1+i)^8(1/8) = 2^(1/8)
funds. T
1+i = 1.090507733
15) A present value calculation tells you how much money would be required now to produce a series of
payments in the future. T i = 1.090507733-1
Annuity due takes into account the fact that payments are made at the beginning rather than the end i = 0.090507733
of each period. T
i = 9.05%
19) Operating Profit Margin of the company is 40%, while Asset turnover is 60%. If total sales amount to BANKING & RISK MANAGEMENT
3,000,000 and previous year's equity and liabilities were 1,500,000 and 2,500,000, respectively. What Financial Management – financial institutions (biggest: banking or banks)
is the total assets of the company this calendar year?
Basic Economic Concepts
AVERAGE ASSET (3,000,000/60%) = 5,000,000 In relation to banking:
PREV. ASSET (1,500,000+2,500,000) = 4,000,000  Utility
TOTAL ASSET (5,000,000*2) = 10,000,000  Satisfaction or happiness
 If we reach our saturation point – point at which satisfaction starts to decline
PRESENT TOTAL ASSET (10,000,000-4,000,000) = 6,000,000 o Law of Diminishing Marginal Utility
 Satisfaction starts to decline from the moment the saturation point is met
 Why do we need to limit the supply or printing of money? If everyone can have it, the value
20) Sales PHP 4,000,000 Sales discount 20,000 Net Sales 3,980,000 COGS 1,600,000 Gross Profit
will decrease.
2,380,000 Expenses 400,000 Net income before tax 1,980,000 Tax 396,000 Net income after tax PHP
 Time Value of Money
1,584,000
 Pwede i-invest sa bank
Using the above data, compute the difference between operating profit margin and net profit ratio  Simple/compound interest (bank)
(use percentage, round off to 2 decimal points before deducting).  Compound: through the intervention of bank, pwede lumago yung pera
 Risk/Return Trade-off
NET SALES = 3,980,000  Trade off – ipagpapalit sa ibang bagay
NIAT = 1,584,000  The higher the risk, the higher the return
 Risk & income: stocks > bonds
SALES = 4,000,000
 Risk in banking system: lower than bonds
 Insurance coverage: ₱500,000 per account holder
OPM (1,584,000/4,000,000) = 39.80%
 Deposits are liabilities of the bank to the depositor (corporate accounts, consumer loans,
NPR (1,584,000/3,980,000) = 39.60%
M(micro)SMEs(small medium enterprise)
39.80% - 39.60% = .20%
Banking Business: Financial Intermediation Process

Deposit Taking Lending

Returns on Returns on
deposits loans

Pooling Allocating
capital from BANKING capital to the
many SYSTEM most
savers important uses
Typical Functions of a Bank Simple Banking Activities
1. Deposit-taking – insurance: 500K per account holder; no specific purpose  Lower scale, scope and risk
2. Credit/Lending – nagpapautang Complex Banking Activities
3. Borrowings – banks may borrow from other banks as well; nangungutang  Higher scale, scope and risk
4. Treasury Operations (Investment/trading) – nakapangalan sa bank Simple structures
5. Trust Operation – no insurance; has specified purpose (ex: debut); can place the money in  Family ang nagpapatakbo or may-ari
different investments Financial Conglomerate
6. International banking – branches or operations in different country for international clients
 Big companies
7. FCDU Operations (Foreign Currency Deposit Unit) – any admitted or acceptable legal tender or
 Property development, telecoms, universal bank, thrift bank, rural bank
foreign currency accepted by the bank. Not all banks have this FCDU.
 Ex. Ayala Group of Companies
8. Private Banking – preferred clients (who either maintain high deposits per month or long-time
clients: like VIP); have dedicated private banker. Why BSP Supervises Banks
9. Brokerage – pumapagitna between investor & investee; sa client nakapangalan, hindi sa broker  Legal Mandate
10. Investment Banking or Underwriting (only allowed to Universal Banks – biggest) Sec. 3 of R.A. 7653
a. Firm Commitment - promise to take a designated action within a specified period of time. o Supervision over the operations of banks
If kulang yung ipapahiram nila, sila gagawa ng paraan para makumpleto yung hinihiram o Regulatory powers over the operations of finance companies and non-bank financial
na pera, higher charge than best effort. institutions performing quasi-banking functions and institutions performing similar
b. Best effort – Yung kaya lang ibigay na money yun lang functions
Sec. 25 of R.A. 7653
Businesses of Banking o Supervision over, and conduct periodical or special examinations of banking institutions
How bank earns: and quasi-banks, including their subsidiaries and affiliates engaged in allied activities
1. Interest Margins (spread) – primary source of income of bank  Ultimate Goal: Financial Stability (2nd Pillar of Central Banking)
2. Trading Income (proprietary activities) – comes from treasury operations o Smooth and orderly functioning of key players in the financial system
3. Investment Income (accrual income if nag-aappreciate) – sangla: collateral
 Adequate protection to investors and depositors (Most important)(adequate for the
4. Commission and fees
public)
BSP SEC, IC, CDA
Banking Institutions Other Financial Institutions NBFIs w/o Quasi Banking o Prevention of isolated & systematic failures of FI
(PDIC as co-regulator) Functions **
Financial intermediation process - Business of banking
Universal Banks (UB) w/ quasi banking functions (may Lending companies 2 main or primary functions of the bank
(biggest) characteristics just like the bank.
1. Deposit taking
Money changers, remittance agents,
etc.) 2. Credit lending
Commercial Banks (KB) Bank-affiliated NBFIs Investment Houses
Thrift Banks Pawnshops Financing Companies Interest income/margin - primary source of income
Rural Banks Capital market participants
Pre-need companies (St. Functions of the bank
Islamic Banks (Al-Amanah) 1. Borrowing – bank borrows money (bawal umutang ang bank sa sarili, kaya umuutang sila sa iba
Peter) – no definite amount
NSSLAs (Non stock Savings and Loans Insurance Companies – has plus mas mababa interst don kesa sa sariling bank)
Cooperative Banks
Associations) (have membership) definite amount 2. Credit lending – bank lends money
Digital Banks
-including banks with Cooperatives DOSRI
microfinance operations - directors, officers, stockholders and related interest - cannot borrow or there is a limit of borrowing from
bank that they own or they are connected to
FCDU (Foreign Currency Deposit Unit) RISK CONCEPT
- not all foreign currency are accepted Definition of risk
- The possibility of loss, damage, or any other undesirable event
Private banking - Ex. of risk - uncertain amount of collectible
- maintain high average daily balance 2 major elements:
- 25M 1. Exposure – lessening the exposure (lending of money) will lessen the risk.
a. Ex. Nagpahiram ka sa isa lang na malaki yung amount, malaki yung exposure.
International Banking 2. Uncertainty – marami kang pinahiram pero mga di naman mapagkakatiwaalaan, so not sure if
- Having branch or operations in the Philippines for clients abroad babayaran ka pa.

Digital Bank Risk in Banking

- Bank that does not need physical branches/offices only an application(app); ING & CIMB – Uncertainty in the outcome (return) of a business activity or situation
 Objective: Maximize upside potential, minimize downside risk
Underwriting – The potential for realizing low returns or even losing money
- Other term for investment banking
Bank run
Universal banks – Confidence of the bank has been diminished
- Underwriting or Investment Banking is only allowed to this type of bank; biggest – Ex. When bank cannot give the money you want to withdraw, what you need to do is run in the
bank and withdraw your money since nagkakaproblem na.
Cooperative banks
- Even though you are not a cooperative, you can still borrow, but the priority are the cooperatives Types of risks assumed by banks and other financial institutions:

Deposit taking 1. Credit risk

- is one into which people can pay money so that it can be held there and earn interest – the risk arises from a counterparty’s failure to meet the terms of any contract with the
financial institution or otherwise perform as agreed (opposite of solvency)
Trust operations – Risk of not receiving the payment from the borrower
- No insurance – Servicing of cash
– Problem in credit lending
Treasury operations 2. Market risk
- Trade and other transactions is under the name of the bank – The risk to earnings or capital arising from changes in the level or vitality of the market prices
of interest rate instruments, foreign exchange instruments, equities and commodities
Brokerage – Big banks that has complex operations (trading of forex, FCDU (bumababa rate ng dollar)
- Trade and other transactions is under the name of the client
3. Operational Risk
3 other sources of income in banks – The current and prospective risk to earnings or capital rising from fraud, error, natural
1. Trading income calamities, incompetence of bank personnel, ineffectiveness of internal controls, and inability
2. Investment Income to deliver products or services, maintain a competitive position and manage information
3. Commission and fees – trust operations, brokerage, investment banking – Problem to people, process, place

4. Liquidity risk
– The current and prospective risk to earnings or capital arising from a FI’s inability to meet its
obligations when they come due without incurring unacceptable losses.
 – No enough cash to service the depositors who are getting the money 1. Ultimate goal of BSP – financial stability
– Collect the money that where borrowed 2. When insurgency problem is common in a banks location, it is basically concerned with – Operational
– Problem in deposit taking Risk
3. The liability of the bank to the public is – Deposits
5. Compliance risk 4. Largest bank in the Philippines – Universal Bank
– The current and prospective risk to earnings or capital arising from violations of, or non- 5. The higher the risk, the higher the return – Risk/Return trade off
conformance to, laws, rules, regulations, prescribed practices, internal policies and 6. Fiscal policy tool – taxation
procedures, or ethical standards 7. Ways for a bank to earn– commission, interest margin, trading income
8. The lender of last resort is – Bangko Sentral ng Pilipinas
6. Legal risk
– The possibility that unenforceable contracts, lawsuits, or adverse judgements disrupt or FINANCIAL PLANNING PROCESS
negatively affect the operation or financial condition of an organization
 Analysing the investment (role of the controller) and financing (role of the treasurer) choices open
– Ex. The account has no fund, but you cleared the check (BP22)
to the firm
 Measures the benchmark on what has actually transpired in the period
7. Strategic Risk
 CFO function in effect – forming strategy for the company
– The current and prospective impact on earnings or capital arising from adverse business  Benchmark – previous year
decisions, improper implementation of decisions, or lack of responsiveness to industry  Outlier – results outside the normal operation/range; outside the common result; ignored
changes.
– Ex. May nilagay sa position (BOD/BOT) na kamag-anak pero hindi competent sa trabaho, may Roles of Financial Planning Models
risk sa strategy since hindi nga sila competent.
 Financial planning models estimate accounting statements and do not focus on financial decision
– Long-term strategy related risk tools such as incremental cash flows, time value, market risk, etc.
 Financial planning models are not focused on financial decisions which would increase market
8. Reputation risk value.
– The current and prospective impact on earnings or capital arising from negative public  Valuation analysis – provide estimate accounting statements
opinion. This affects the FI’s ability to establish new relationships or services or continue  Continuation of horizontal/trend analysis – previous years
servicing existing relationships  For the future/futuristic – basis of data is from the previous year or the benchmark
– Ex. May mga chismis about sa bank
Planning horizon
Types of bank accounts  Time horizon for a financing plan
1. Savings accounts – atm, passbook  Gaano katagal yung planning?
2. Checking account (Current) - check  How long does a company plan?
3. Time deposit – cannot withdraw from a certain time, lessen the liquidity risk.  Tactical – less than 5 years
 Strategic – min. of 5 years
Statement of Account
Contingency Planning
- Also known as bank statement
- Provides the details of the deposits and withdrawals to the account  Considering variety of future outcomes and prepares for each should they occur (ranges of
- Tinitignan sa bank reconciliation outcomes/possibilities/provisions)
 Not only forecasting, as forecasting attempts to estimate the most likely future outcome, such as
level of sales
 “what if” analysis
 If bank: “Pano kung yung top 10 percent kong borrower hindi magbayad”
 Ex “what if mabawasan ung enrolees next sem …”
Considering options The most common financial planning model

 Financial planning provides an opportunity to identify and evaluate options available, such as  Percentage of sales model
expansion, plant closure, etc.  Many estimated variables, such as assets, may not always be proportional to sales
 Real options are valuable and should be part of financial plans  Fixed assets are not added in small amounts
 Ex. Sell other equipment/partner with other universities/remove professors (for Adamson)
Planners Beware!
Forcing Consistency
 Many models may ignore significant realities such as depreciation, taxes etc.
 Financial plans provide a connection between growth, profitability, dividend policy, and financing  Percent of sales methods are not always realistic because fixed cost exist (sales or expense driven)
requirements  Most models generate accounting numbers not financial cash flows (receivables)
 Accounting ratios should serve as performance measures; focus on value creation (cash flows, risk  Write-off – if may bad debts na di nakokolekta, bababa accounts receivables
and timing) is the primary focus
 Financial statement analysis - analysing financial of the past
 Know time value of money
3 requirements for effective planning
1. Forecasting (cornerstone of budgeting – requires time and effort)
 You must have past information and present condition
 Starts with planning (PRIM)
2. Choosing the best or optimal plan (lowest plan)
3. Watching the plan unfold, comparing actual occurrence to the plan and addressing variances
Financial Planning Model establishes the relationship between:

 Economic activity (sales) – sales targets/target sales

 Business policies, such as credit policies (sales/cash discount)– offer sa clients, the requirements
sa clients
 Resulting resources needed (including assets, employees, or financial capital) – resources needed
to fulfil their plans
Financial Planning Models

 Inputs
 Forecast of key variables (such as sales or interest rates)
 In most financial plans, expected sales is the major independent variable as input
 Based on current financial statements
 Planning Model
 Equation specifying key relationships among the company’s financials
 Calculates the estimated level of resources needed, the expected financing needs, and the
expected profit and cash flow
 Outputs
 Includes estimated/projected financial statements (proforma - projected) based on
assumptions and relationships in the plan, including the uses and resources of funds
FINALS QUIZ I. Insurance companies are not under the supervision of BSP.
II. You may borrow from an NSSLA even if you are not a member or linked to a member.
I. Banking engages in financial intermediation process.
TRUE/FALSE. You must be a member of a Non-stock savings and loans association or at
II. UKBs are the only ones which may engage in Investment banking. least a relative of a member to borrow.
TRUE/FALSE. Only universal, not commercial banks, are allowed (UKB is both).
I. A reason for cash handling includes precautionary and transaction purpose.
I. I-P-O model in financial planning is Input-Process-Output.
II. Contingency planning is all about analyzing other possible outcomes.
II. Depreciation and taxes are realities that may be ignored in financial planning. FALSE/FALSE. TRUE/TRUE.
Input-Planning Model – Output. Under “Planners Beware”, depreciation and taxes
MUST NOT be ignored.
I. Planning horizon is a time horizon for a financing execution.
II. Expected sales is an output of a planning model for budgeting.
I. Economic activity is the driver of Percentage of Sales model.
FALSE/FALSE. Planning horizon is a time horizon for a financing plan. Expected sales is
II. Real options must always be part of financial plans. an input of a planning model for budgeting.
TRUE/TRUE.
I. An optimal plan is always the lowest plan.
I. Interest margins are also known as interest spread. II. Credit is considered a business policy.
II. Inventories are to Deposits, as Trade payables are to loans.
FALSE/TRUE. Optimal plan may be the lowest plan, but not always.
TRUE/FALSE. Deposits are liabilities of the bank, not their assets like the inventory of
manufacturing businesses.
I. Current assets generally grow in proportion to sale.
II. Retained earnings may be considered external source of finance.
I. Credit risk indicates an issue on liquidity. TRUE/FALSE. Retained earnings are part of capital, hence, internal.
II. NSSLAs are considered "Other Financial Institution"
FALSE/TRUE. Credit risk indicates issues on solvency. I. A cash receipts budget is dependent on a purchase budget.
II. A purchase budget is dependent on sales budget.
I. Rural Banks used to be the smallest banks in the country. FALSE/TRUE. Cash disbursement is dependent on purchase budget, not cash receipts.
II. There are 2 islamic banks in the country: Al and Amanah.
FALSE/FALSE. Thrift banks used to be the smallest bank. There is only 1 Islamic bank: I. Computing expenses in the cash budget often includes utilities, taxes, and depreciation.
Al-Amanah II. The beginning inventory of the period is always the ending inventory of the previous one.
FALSE/TRUE. Depreciation is non-cash, therefore, not considered expense in a cash
I. Strategic plans are long-term in nature, with a minimum of 5 years. budget.
II. EOQ is the technique used to determine the optimum level of inventory.
TRUE/TRUE. I. Potential for losing money is a risk in banking.
II. Internal controls are included in operational risks of the banks.
I. Leverage may either be financial or operating. TRUE/TRUE.
II. IPO means Initial Public Offering, which is a mode to raise capital for a firm.
TRUE/TRUE.
I. A Bank account is also known as SOA.
II. The higher the risk, the higher the return, is reflects the concept of Utility.
I. Cooperative banks may only lend to cooperatives.
FALSE/FALSE. Bank account is broader than SOA or bank statement. It covers time
II. PDIC is a co-regulator of the BSP. deposits, savings, and checking accounts. Risk return trade-off is the concept reflected.
FALSE/TRUE. Cooperative banks NOT confined to cooperatives.
I. Stock brokerage are not regulated by the BSP.
II. Marginal utility is the point at which satisfaction starts to decline.
TRUE/FALSE. Saturation point is the point at which satisfaction starts to decline.

I. Even rural banks may apply for FCDU license.

II. The ultimate goal of BSP is financial stability.
TRUE/TRUE.

I. Certainty is an element of risk.

II. BSP is known as the lender of last resort to the Banks only.
FALSE/TRUE. Uncertainty, not certainty.

I. Time deposits are tools that a Bank may use to assist in liquidity.
II. Both compliance and legal risk are driven by laws, rules, and regulations of a country.
TRUE/TRUE.

I. Risk-return trade-off for banks: The higher the scope, the lower the risk.
II. There are more head offices of universal banks than rural banks.
FALSE/FALSE. Higher the scope, higher the risk. There are more head offices or rural
banks than universal banks, universal banks have more resources.

I. Working Capital Management is a short term capital, since it also includes acquisition of goods
daily.
II. A financial conglomerate is 100% family-owned.
TRUE/FALSE. A financial conglomerate may be owned by people outside (e.g. those
whose stocks are traded like Ayala group, SM, etc.)

I. A bank may both be a universal and digital bank.

II. Trust operations assigns you are relationship manager to handle your funds.
FALSE/FALSE. Though other banks may offer digital services, digital banks do not have
physical facilities. Private banking is the function which has a dedicated relationship
manager.