FINANCIAL

MANAGEMENT

SAMUEL BARBO, JR.

Functions of Financial
Managemnt
 ROLE FINANCE MANAGER
Financial Manager
Makes Decisions
Involving

Analysis and Acquisition of Utilization of

Planning Funds Funds
ROLE FINANCE MANAGER
Acquisition of
Funds
Impact on Risk and
Return
Affect the Market
Price of Common
Stock
Lead to Shareholder’s
Maximization
 ROLE FINANCE MANAGER

⮚Having examined the field of finance and some of

its more recent developments, the financial
managers makes decisions involving:
1. Planning
2. Acquiring
3. Utilizing of funds
 ROLE FINANCE MANAGER

⮚These financial decisions affect the market value of

the firm’s stock which lead to wealth maximization.
⮚Many factor affects the market price of the firm’s
share which are beyond management’s control.
Some of the changes in market price do not reflect a
fundamental change in the value of the firm.
 ROLE FINANCE MANAGER

❑Responsibility of Financial Management

1. Allocate funds to current and fixed assets
2. Obtain the best mix of financing alternatives
3. Develop an appropriate dividend policy within
the context of the firm’s objectives.
 ROLE FINANCE MANAGER

❑Daily Activities of Financial Management

1. Credit management
2. Inventory control
3. Receipt and disbursement of funds
 ROLE FINANCE MANAGER

❑Routinary Function of Financial

Management
1. Sale of stock and bonds
2. Establishment of capital budgeting
3. Dividend plans
 ROLE FINANCE MANAGER

❑Routinary Function of Financial

Management
1. Sale of stock and bonds
2. Establishment of capital budgeting
3. Dividend plans
 ROLE FINANCE MANAGER

⮚The appropriate risk-return trade-off must be

determined to maximize the market value of the firm
for its shareholders.
⮚The risk-return decision will influence not only the
operational side of the business but also the
financing mix.
 THE FINANCE ORGANIZATION

⮚The financial management function is usually

associated with a top officer of the company such as
Vice President for Finance or some other Chief
Financial Officer.
 THE FINANCE ORGANIZATION

❑The Vice President – Finance coordinates the

activities of the treasurer and the controller.

❑The chief financial officer (CFO) is in charge of all

the organization’s finance and accounting functions
and typically reports to the chief executive officer.
 THE FINANCE ORGANIZATION

❑The controller is responsible for managing the

accounting staff that provides managerial accounting
information used for internal decision making,
financial accounting information for external reporting
purposes, and tax accounting information to meet tax
filing requirements. The three accountants the
controller manages are as follows:
 THE FINANCE ORGANIZATION

1. The managerial accountant reports directly to

the controller and assists in preparing information
used for decision making within the organization.
Reports prepared by managerial accountants
include operational budgets, cost estimates for
existing products, budgets for new product lines,
and profit and loss reports by division.
 THE FINANCE ORGANIZATION

❖Note that some people use the term cost

accountant interchangeably with managerial
accountant. Others consider cost accounting a
specific function of managerial accounting that
focuses on measuring costs. In this text, we use the
term managerial accountant and assume that cost
accountants focus on measuring costs.)
 THE FINANCE ORGANIZATION

2. The managerial accountant reports directly to

the controller and assists in preparing information
used for decision making within the organization.
Reports prepared by managerial accountants
include operational budgets, cost estimates for
existing products, budgets for new product lines,
and profit and loss reports by division
 THE FINANCE ORGANIZATION

❖Note that some people use the term cost

accountant interchangeably with managerial
accountant. Others consider cost accounting a
specific function of managerial accounting that
focuses on measuring costs. In this text, we use the
term managerial accountant and assume that cost
accountants focus on measuring costs.)
 THE FINANCE ORGANIZATION

3. Tax accountant. 
⮚The tax accountant reports directly to the
controller and assists in preparing tax reports for
governmental agencies, including the Internal
Revenue Service.
 THE FINANCE ORGANIZATION

❑The treasurer reports directly to the CFO. A

treasurer’s primary duties include obtaining sources
of financing for the organization (e.g., from banks
and shareholders), projecting cash flow needs, and
managing cash and short-term investments.
 THE FINANCE ORGANIZATION

❑An internal auditor reports to the CFO and is

responsible for confirming that the company has
controls that ensure accurate financial data. The
internal auditor often verifies the financial
information provided by the managerial, financial,
and tax accountants (all of whom report to the
controller and ultimately to the CFO).
 THE FINANCE ORGANIZATION

❑If conflicts arise with the CFO, an internal auditor

can report directly to the board of directors or to the
audit committee, which consists of select board
members.
 RELATIONSHIP WITH OTHER KEY
FUNCTIONAL MANAGERS IN THE
ORGANIZATION

❑Finance is an integral part of total management and

cuts across functional boundaries.
❑Finance is concerned with all the monetary aspect
of a business.
❑The finance manager must interact with other
managers to ascertain the goals that must be met,
when and how to meet them.
 RELATIONSHIP WITH OTHER KEY
FUNCTIONAL MANAGERS IN THE
ORGANIZATION

❑Other functional areas could not operate without

funds, such as marketing and manufacturing of
which are critical for the survival of a business
because these areas determine what will be
produced and how these products be sold.
 CORPORATE GOVERNANCE

❑Is the process of monitoring managers and aligning

their incentives with shareholders.
❑Shareholders are usually inactive, the firm actually
seems to belong to management.
❑Investing public does not know what goes on at the
firm’s operational level.
 CORPORATE GOVERNANCE
❑Managers handle day-to-day operations, and they
know that their work is mostly unknow to investors.
❑This lack of supervision demonstrate the need for
monitors.
❑The monitors are
1. Inside the company
2. Outside the company
CORPORATE GOVERNANCE

1. Inside the company

a. Board of Directors – they are the appointed to
represent shareholders’ interest. The BOD
hires the CEO, evaluates management.
CORPORATE GOVERNANCE

2. Outside the company

a. External Auditor – examine the firm’s
accounting system and comment on whether
the financial statements fairly represent the
financial position.
CORPORATE GOVERNANCE

2. Outside the company

b. Investment analysts – keep tract of the firm’s
performance, conduct their own evaluation of
the company’s business activities and report
to the investment community.
CORPORATE GOVERNANCE

2. Outside the company

c. Investment banks – help firms access capital
markets also monitor firm performance.
d. Credit analysts – examine a firm’s financial
strength for its debt holders.
CORPORATE GOVERNANCE

2. Outside the company

e. Government – also monitors business
activities through SEC, BIR, Central Bank,
and so on and so forth.
 ETHICAL BEHAVIOR
❑Ethics
⮚is concerned with human behavior that is
acceptable or "right" and that is not acceptable or
"wrong" based on conventional morality. 
⮚Ethics in Finance talks about financial behavior or
activities that are ethically right or wrong.
 ETHICAL BEHAVIOR
❑Ethics
⮚Are of primary importance in any practice of
finance.
⮚Finance professionals commonly manage other’s
people money.
 ETHICAL BEHAVIOR
❑Ethics
⮚This fiduciary relationships oftentimes create
tempting opportunities for finance professionals to
make decisions that either benefit the client or
benefit the advisors themselves.
 ETHICAL BEHAVIOR
❑Ethics
⮚Financial manager must realize that they owe the
owners/shareholders the very best decisions to
protect and further shareholders interest, but they
also have a broader obligation to society as a
whole.
THANK YOU AND
GOD BLESS.