INTRODUCTION TO

FINANCIAL MANAGEMENT
 SPECIFIC
OBJECTIVES:
 Define Finance
 Identify the difference areas of finance
 Discuss finance in a business organization
 Discuss finance in a business organization
 Describe the functions of a finance officers
 FINANCE
3

Define by the American Heritage

Desk Dictionary, as the management
of MONEY, BANKING,
INVESTMENTS, and CREDIT.
It directly suggests that finance is directly
related to money or to a business activity that
primarily deals with money transactions.
Define as both Science and art of managing
money. (Gitman & Zutter, 2012).
It is both Science and Art of the correct
application of the economic and accounting
concepts and principles the define the
SYSTEM, STRUCTURE,
 Finance is said to be a Science because Finance
uses factual information in financial activities.
And said to be an Art because finance will
continue to evolve in the future due to new
developments and trends in business practices.
 6

FINANCE IS CONCERNED WITH DECISIONS ABOUT:

• BUDGETING- is a process of
preparing a financial budget.
• SOURCE OF FUNDS- in finance can
be short term or long term funds.
 7

DIVISION OF FINANCE
Presentation title 8

AREAS OF FINANCE
TWO CLASSIFICATIONS OF FINANCE

 Private Finance is the management of financial resources

of private individuals, nongovernmental organizations
and private organizations.
 Public Finance, on the other hand, is an allocation of
government income generated from their taxation or
borrowings.
Private finance is subdivided into two; these are Personal
and Business Finance. (Aduana, Business Finance)
Personal Finance is all about the management of personal
resources of a person/ individual. (Aduana, Business
Finance)
Business Finance is into taking care of and overseeing of
money related assets of a business organization. It has three
major divisions: the financial management, capital
management, and financial investment.
Presentation title 10

DIVISION OF FINANCE
Financial Management focuses on capital
budgeting decisions or investment decisions. The
main goal is to maximize the value of
shareholders’ wealth. (Cayanan)
Capital Market is an area of finance that studies
the different financial institutions and its
functions that can provide assistance to private
and public borrowers of funds.
Financial Investment focuses on business
decisions about the value and price of stocks and
bonds.
FINANCE IN A BUSINESS
ORGANIZATION
 SHAREHOLDERS- Each shareholder has one voting right
and they elect the Board of Directors (BOD).
 Board of Directors – Their responsibility is to carry out the
objective of the shareholders.
Responsibilities includes:
 Setting policies on investment, capital structure, and
dividend policies.
 Appointing and removing members of the top
management
 Approving company’s goals, budget, and strategies.
President (Chief Executive Officer) – The President
or CEO’s roles vary from one company to another.
Some of the basic responsibilities of the CEO include
the following; oversees the operation of the company
thus ensuring that strategies approved by the board are
implemented; represents the company in all activities
such as professional, social and civic activities and the
CEO ensures all the areas of management: planning,
organizing, staffing and controlling.
 VP for Marketing – The VP for marketing’s responsibilities includes
formulating marketing strategies of the organization, directing
company sales, analyzing market and competitor, evaluating
marketing methods used, and heading the marketing research.
 ▪ VP for Production – The VP for production ensures that
production meets customer demands, comes up with a production
plan, identifies production processes that will help the company, and
identifies affordable suppliers.
 ▪ VP for Administration – The role of the VP for Admin is to
coordinate the functions of the administration, finance, and
marketing departments. He/she assist other departments in hiring
employees; assist in payroll preparation, payment vendors, and
collection receivables. The VP for admin also identifies the means,
processes, or systems that can help the company maximize its
operating costs.
 VP for Finance – The role of the VP for finance is to manage the
finances of the company or organization. He or she is the financial
traffic officer of the organization. He or She is engaged in making
decisions for the business in operating, investing, and financing. The
VP for finance determines the appropriate capital structure of the
company.
The decision making of a finance officer is classified into the
following;

1. Operating Decisions - this includes credit and collection, checking

on the level of inventory, budgeting, payment, and control of
operating expenditure and daily operating decisions.
2. Investing Decisions - deals with non-current asset acquisition,
investment portfolio, pricing decision of stocks and bonds, and cash
flow analysis in budgeting.
3. Financing Decision- deals with equity and debt financing, cost of
capital and borrowing, interest rate, and short-term and long-term
borrowing.
Let us now explore the qualifications of a finance officer or the VP for
Finance. A finance officer must have the following qualifications:
1. He/she must have sound knowledge of accounting and economic
concepts and principles.
2. Understand the operation, statistic, and marketing research profoundly.
3. Possess good communication in both oral and written forms.
4. With impressive relationships with banks and other financial institutions
5. Good relationship within the business and other functional areas of the
company.
6. Obtain technical experience in finance and can provide professional
judgement.
7. Ethically and morally upright and socially responsible.
 The Role of Financial Management

1. Financial Decision and controls – Financial managers and

management play a vital role in making financial decisions over the
organization or company. They use techniques like financial
forecasting, profit, and loss analysis, etc. in analyzing the
company’s financial status.
2. Financial Planning – The Finance officer is responsible for the
planning of financial activities or the organization. They will use
available data to understand the needs and priorities of the company as
well as the overall situation. It also the role of the finance officer to
plan and budget for the company financially.
3. Capital Management – It is the role of the financial management to
estimate and allocate capital requirement of the company from time to
time, makes the choice of source of funding in case of capital needs.
4. Allocation and Utilization of financial resources – Financial
managers ensure that all financial resources of the company are used and
invested effectively to make sure that the company is profitable,
sustainable, and can operate in the long-run.

5. Cash Flow Management – It is very important for a company to have

sufficient working capital and cash flow to meet its operational expenses
and emergencies. It is now the role of financial management to keep track
of accounts payable and receivable to make sure that there is sufficient
cash flow available at all times.
6. Disposal of Surplus - Financial managers decide on how surplus or
profits of the company will be utilized. It is under their control of how
dividends will be distributed and how much as well as the proportion
of profits that must be retained into the company.
7. Financial Reporting – It is the financial management that maintains
all the financial reports related to the finance of the company. It uses a
database for planning and forecasting financial activities for the
company
8. Risk Management – The finance officer prepares for the company
for any forecasted risk and makes necessary plans to address it.
 22

“ BUSINESS OPPORTUNITIES ARE

LIKE BUSES. THERE'S ALWAYS

”
ANOTHER ONE COMING.
Richard Branson
ASSIGNMENT