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Financial Management-Lesson 3

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36 views

Financial Management-Lesson 3

Uploaded by

Kim Bulawan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Financial Management

(MBA 104)

Presented By: Dr. Richard Oliver F. Cortez, DBA, FRIBA, AFBE


AMA University
COURSE DESCRIPTION:

The course deals with the basic financial policies and strategies in
business operations. It deals with the role of the financial manager,
especially the treasurer, in determining the financial goals of the
business. It covers analysis of cash flows and financial statements. It
deals with decisions over a period of time, considering the time value of
money and interest rates, risk management and valuation. It touches on
financial planning including budgeting. The discussions, then centers on
short-term financial management, covering working capital management,
cash and marketable securities, receivables, inventory management and
short-term financing.
Upon successful completion of the course, the
student will be able to:

1. Evaluate sources of funds and their cost.

2. Decide upon funds sources to be used.

3. Determine how funds are to be


effectively used

4. Able to apply their knowledge on project opinion.


TOPICS TO BE COVERED:
• Definition of Managerial Finance

• The Finance Functions

• The Controllership and Treasury Functions

• The Financial Decisions

• Framework for making financial decisions

• The goal of finance

• Overview of financial management process


LEARNING OUTCOMES:

• Discuss and explain the importance of financial management


in business.
• Demonstrate the ability to implement the concept of
financial management
• Learn Business finance investment
Financial management

It refers to the efficient and effective


management of money (funds) in such a manner
as to accomplish the objectives of the
organization. It is the specialized function directly
associated with the top management. The
significance of this function is not seen in the
'Line' but also in the capacity of the 'Staff' in
overall of a company. It has been defined
differently by different experts in the field.
The Controller
Focus: Inward Transactions,
Past Business Activities, and
Compliance

The Role:
A financial controller is the head
accountant of the company. They
supervise other accountants and
oversee the preparation of
financial reports, such as income
statements and balance sheets.
The Treasurer
Focus: Outward Movers Looking Towards
the Future of the Business

The Role:
The treasurer serves as the protector of a
company’s value and finances from financial
risks that arises from business activities.
Traditionally, a treasurer is under the
accounting department, but has now branched
out into a new segment which is known as the
corporate treasury management
The financing decision involves Two sources
from where the funds can be raised: using a
company’s own money, such as share capital,
retained earnings or borrowing funds from the
outside in the form debenture, loan, bond, etc. The
objective of financial decision is to maintain
an optimum capital structure, i.e. a proper mix of debt
and equity, to ensure the trade-off between the risk
and return to the shareholders.
Question #1: Explain how securities
markets provide a link between the
corporation and investors.

Question #2: Describe the tax benefits to a


corporation of issuing debt rather than issuing
stocks.
Research Work in Financial Management:

1.Make a research about a local Finance Manager


2.Focus on their Financial Management Style

Note : a. To be submitted in a 2-page bond paper


b. With photo
c. Be ready to present randomly
While taking the financial
decisions, the finance manager has
to take the following points into
consideration:
•The Risk involved in raising the funds. The risk is higher in the case of
debt as compared to the equity.

•The Cost involved in raising the funds. The manager chose the source
with minimum cost.

•The Level of Control, the shareholders, want in the organization also


determines the composition of capital structure. They usually prefer the
borrowed funds since it does not dilute the ownership.

•The Cash Flow from the operations of the business also determines the
source from where the funds shall be raised. High cash flow enables to
borrow debt as interest can be easily paid.

•The Floatation Cost such as broker’s commission, underwriters fee,


involved in raising the securities also determines the source of fund. Thus,
securities with minimum cost must be chosen.
The Goal of Financial Management

• Profit maximization
• Wealth maximization
• Survival of company
Profit maximization is the short run or
long run process by which a firm may
determine the price, input, and output
levels that lead to the greatest profit.
Wealth maximization is the
concept of increasing the value of a
business in order to increase the
value of the shares held by
stockholders
Survival of Company

1. Prevention
Review your costs, and get as lean as possible,
even when you’re not facing a cash crunch. Also
keep an eye on your balance sheet. Strive to
keep on top of technological and market
changes.

2. Contingency planning
Prepare a contingency plan that covers red flags
to watch out for, such as the loss of an important
client or a sudden increase in costs.

3. Act quickly
Don’t delay in taking decisive action if trouble
looms. And don’t be shy about seeking outside
advice if needed.
CREDIT

goes to for the images


used in the presentation
Thank you very
much for
listening!

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