FINANCIAL

MANAGEMENT
for 3rd Year
Students
 “
Finance without strategy is just numbers,
and strategy without finance is just
dreaming.

-E.Faber

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What is your DREAM CAREER

in Finance?
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1st Semester Subjects

◎ Financial Management
◎ Risk Management
◎ Security Analysis
◎ Behavioral Finance
◎ Banking and Financial Institutions
◎ Franchising

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 1
Financial Management

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Financial Management
What to expect What you should know
- Intro to Financial -Financial Accounting
Management Foundations
- Financial Statement -Business Finance (SHS)
Analysis
- Financial Planning &
Ratios
- Stocks & Bond Valuation

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 What is Finance?
◎ The application of economic principles to decision
making that involves the allocation of money under
conditions of uncertainty.
◎ It provides the framework for making decisions as to how
to get the funds and what we should do with them once
we have them.

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 Areas of Finance

Financial
Corporate Financial
Markets &
Finance Institutions Investments

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 Corporate Finance
◎ Also known as Financial Management or Business Finance
◎ It studies the role of the financial manager, his/her ability to
meet obligations as they come due, identifying the best
source of funds, allocating resources among available
investment alternatives.
◎ The art and science of managing the financial resources of
organization.

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What does a Financial Manager do?

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 Roles of Financial Managers (Peirson, 1997)
• Managing investments in NC Assets thru evaluation of capital projects
• Evaluating, Obtaining and Servicing long-term financial requirements
• Distribution of Dividends to shareholders
• Collection of Custody of cash and payment of bills
• Managing investment in Current Assets
• Obtaining and Servicing short term finance
• Managing risks associated with changes in interest rates and
• exchange rates
• Assessing the viability of growth thru acquisition of other businesses
• Planning the future development of the business
• Development and implementation of financial policies

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Two Major Types of Financial Decisions

Financing Decisions

Investment Decisions

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3 decisions made by Financial Managers

g
e tin
udg
l B
i ta
C ap

Working Capital
Management

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Capital Budgeting
This concerns the planning and managing of the firm’s longterm
investments. The Financial Manager tries to identify investment
opportunities that are worth more to the firm than the cost to acquire.

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Additional Capital Structuring
Capital Debt
This evaluate ways in which the firm obtains and manages the
longterm financing it needs to support its longterm investments.

Sale of
Assets

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Working Capital Management
This refers to the administration of the firm’s short term assets,
including inventory and its short term liabilities such as money owed
to supplies. It aligned with the firm’s daily operations.

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 Financial Institutions
◎ Also known as Financial Intermediaries

◎ They serve as middlemen between savers and borrowers. They collect

funds from savers or depositors and lend tem or invest them in
businesses of people that need cash for capital.

◎ These are commercial banks, investment banks, insurance companies,

savings and loan association, cooperative, thrift banks and etc.

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 Financial Markets & Investments
◎ These are the frameworks or mechanisms for bringing together those
that have money to invest to those who need funds.

◎ It can be a central location for the trading of financial claims.

◎ It elaborates the term “Direct Financing”.

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 2
Security Analysis
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 Securities
are fungible and tradable financial instruments used to raise
capital in public and private markets.

B on ds

Stock
s Co
mm
odi
ties
Derivativ
es

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 KINDS OF ANALYSIS

Technical Analysis Fundamental Analysis

• Charts • Financial Statements

• Patterns • Ratio Analysis
• Sentiments of the Market • Business News and Prospect
• Short Term • Long Term

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Key Aspects of Security Analysis

Short Term
- Trading and Emotional Forces

Long Term
- Business Prospect

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Factors Affecting Equity Values

Unforeseen Unexpected
developments in changes in
company-specific macroeconomic
matters indicators

Distinctive Unusual shocks

patterns in a to an industry
public stock’s activity
trading

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 Why ANALYZE a Security?

To reduce the risk Investors are on a

treasure hunt

To justify an investment For the thrill of the

decision Game

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FUNCTIONS OF SECURITY ANALYSIS

DESCRIPTIVE FUNCTION

SELECTIVE FUNCTION

CRITICAL FUNCTION

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Things to consider before trading and
investing:

Time Horizon

Risk Appetite

Financial Goals

Current Balance of Funds

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 How do we ANALYZE Securities?

1
INTRINSIC VALUE
The worth of a business equals the net present value of its future dividends

2 RELATIVE VALUE
A company’s value is determined by comparing it to similar companies’ values

3
ACQUISITION VALUE
Calculate a company’s share price thru evaluating its worth to a 3 rd party acquirer

4 LEVERAGED BUYOUT VALUE

One prospective price for a business is its value in a leveraged buy-out

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TECHNICAL ANALYSIS VALUE
A share price can be predicted by examining its historical trading pattern
and applying it to the future.
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 Who’s practicing Security Analysis and Business
Valuation?
◎ Securities Firms

◎ Individual Investors

◎ Major Institutional Investors

◎ Index-Funds and Exchange Traded Funds

◎ Small money management firms

◎ Rating Agencies

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 “
Knowledge will always be your Number
one Asset.

THANK YOU GUYS!

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