introduction in financial management students' copy
TRANSCRIPT
-
7/28/2019 Introduction in Financial Management Students' Copy
1/26
Introduction inFinancialManagementFIN131, TUA
Prof. Jephte O. Munez,
CPA, CPV, PREB, MBA, MSF
-
7/28/2019 Introduction in Financial Management Students' Copy
2/26
FINANCIAL MANAGEMENT It is the process of planning, organizing,
leading and controlling decisions in order
to maximize owners/ owners wealth.
-
7/28/2019 Introduction in Financial Management Students' Copy
3/26
GOALS OF CORPORATEFINANCE
Shareholder Wealth Maximization
Profit Maximization
Managerial reward maximization
Behavioral goals
Social Responsibility
-
7/28/2019 Introduction in Financial Management Students' Copy
4/26
Profit Maximization versusShareholders Wealth Maximization
Goal Objective Advantages Disadvantages
Profitmaximization
Large profits Easy to calculateprofits
Emphasizes theshort term
Easy todetermine thelink betweenfinancialdecisions andprofits
Ignores the risk oruncertainty
Ignores thetiming of returns
Requiresimmediateresources
-
7/28/2019 Introduction in Financial Management Students' Copy
5/26
Profit Maximization versusShareholder Wealth Maximization
Goal Objective Advantages Disadvantages
Stockholder WealthMaximization
Highest marketvalue of common
stock
Emphasizes the longterm
Offers no clearrelationship
between financialdecisions and stockprice
Recognizes risk oruncertainty
Can lead tomanagementanxiety andfrustration
Recognizes the
timing of returns
Can promote
aggressive andcreativeaccountingpractices
Considersshareholders return
-
7/28/2019 Introduction in Financial Management Students' Copy
6/26
Risk
The variability of expected returns (sales,earnings and cash flow) and is the
probability that a financial problem willaffect the companys operationalperformance or financial position.
-
7/28/2019 Introduction in Financial Management Students' Copy
7/26
Forms of Risk
Economic risk
Political uncertainties
Industry problems
-
7/28/2019 Introduction in Financial Management Students' Copy
8/26
Risk Analysis
Is the process of measuring and analyzingthe risk associated with financial and
investment decisions. The rate of return in relation to the degree
of risk involved.
Return is the reward for investing, consists ofcurrent income, in the form of either
periodic cash payments or capital gain (orloss) from appreciation (or depreciation) inmarket value.
-
7/28/2019 Introduction in Financial Management Students' Copy
9/26
Time Value of Money Todays dollar (peso) is not the same as
tomorrows dollar (peso) A dollar (peso today
is worth more than a dollar (pesos to bereceived later because you can invest thatdollar (peso) for a return and have more thana dollar (peso) at the specified later date.
Furthermore, receiving a dollar (peso) in the
future has uncertainty attached to it; inflationmight make the dollar (peso) received at alater time worth less in buying power.
-
7/28/2019 Introduction in Financial Management Students' Copy
10/26
Time Value of Money
Compoundingdetermining the futurevalue of a projected cash inflows.
Discountingdetermining the presentvalue of future cash flows associated withlong-term projects; the discounted valueof receiving future cash flows from a
proposal is an important consideration.
-
7/28/2019 Introduction in Financial Management Students' Copy
11/26
Importance of Finance Financial knowledge aids in planning, problem-
solving and decision is making. Financial and accounting knowledge is important
in order to understand the financial reportsprepared by other segments of the organization.
Finance allows better communication amongdepartments.
Knowledge of forecasting and capital budgeting(selecting the most profitable project among long-
term alternatives) is essential. Financial knowledge is critical in a wide number of
areas, such as, financing, financial statementanalysis, capital investment decisions.
-
7/28/2019 Introduction in Financial Management Students' Copy
12/26
Scope and Role of Finance
Language and decision making offinance
Responsibilities of Financial Managers
Relationship between accounting andfinance
-
7/28/2019 Introduction in Financial Management Students' Copy
13/26
Finance involves interrelatedfunctions
Obtaining funds
Using funds
Monitoring performance Solving current and prospective problems
Product pricing and planning
Variance analysis (comparing actual to budgetfigures)
Asset management Optimize rate of return
Financial strengths and weaknesses of businesses
-
7/28/2019 Introduction in Financial Management Students' Copy
14/26
What do Financial ManagersDo?
Financial analysis and planning
Making investment decisions
Making financing and capital structuredecisions
Managing financial resources
Managing risks
-
7/28/2019 Introduction in Financial Management Students' Copy
15/26
Financial Manager affects
Shareholders WealthMaximization
Current and future Earnings Per Share(EPS)
Timing, duration and risk of earnings
Dividend policy
Manner of Financing
-
7/28/2019 Introduction in Financial Management Students' Copy
16/26
FUNCTIONS OF FINANCIALMANAGER
Planning
Provision of Capital
Administration of Funds Accounting and Control
Protection of Assets
Tax Administration
Investor Relations Evaluation and Consulting
Management Information Systems
Source: Financial Executives Institute
-
7/28/2019 Introduction in Financial Management Students' Copy
17/26
FUNCTIONS OF FINANCIALMANAGER - Planning
Long and short-range financial andcorporate planning
Budgeting for operations and capitalexpenditures
Evaluating performance
Pricing policies and sales forecasting
Analyzing economic factors
Appraising acquisitions and divestment
Source: Financial Executives Institute
-
7/28/2019 Introduction in Financial Management Students' Copy
18/26
FUNCTIONS OF FINANCIALMANAGERProvision of Capital
Short-term sources: cost andarrangement
Long-term sources: cost andarrangements
Internal generation
Source: Financial Executives Institute
-
7/28/2019 Introduction in Financial Management Students' Copy
19/26
FUNCTIONS OF FINANCIAL MANAGERAdministration of Funds
Cash Management
Banking arrangements
Receipt, custody and disbursement ofcompanys securities and monies
Credit and collection Management
Pension monies Management Investment portfolio Management
Source: Financial Executives Institute
-
7/28/2019 Introduction in Financial Management Students' Copy
20/26
FUNCTIONS OF FINANCIAL MANAGERAccounting and Control
Establishing accounting policies
Developing and reporting accounting data
Cost accounting Internal Auditing
System and procedures
Government reporting
Reporting and interpreting results of
operations to management Comparing performance with operating
plans and standards
Source: Financial Executives Institute
-
7/28/2019 Introduction in Financial Management Students' Copy
21/26
FUNCTIONS OF FINANCIALMANAGERProtection of Assets
Providing for Insurance
Establishing sound internal controls
Source: Financial Executives Institute
-
7/28/2019 Introduction in Financial Management Students' Copy
22/26
FUNCTIONS OF FINANCIALMANAGERTax Administration
Establishing tax policies and procedures
Preparing tax reports
Tax planning
Source: Financial Executives Institute
-
7/28/2019 Introduction in Financial Management Students' Copy
23/26
FUNCTIONS OF FINANCIALMANAGERInvestor Relations
Maintaining liaison with the investmentcommunity
Counselling with analystpublic financialinformation
Source: Financial Executives Institute
-
7/28/2019 Introduction in Financial Management Students' Copy
24/26
FUNCTIONS OF FINANCIAL MANAGEREvaluation and Consulting
Consulting with and advising othercorporate executives on company
policies, operations and objectives andtheir effectiveness.
Source: Financial Executives Institute
-
7/28/2019 Introduction in Financial Management Students' Copy
25/26
FUNCTIONS OF FINANCIAL MANAGERManagement Information Systems
Development and use of computerizedfacilities
Development and use of managementinformation systems
Development and use of systems andprocedures
Source: Financial Executives Institute
-
7/28/2019 Introduction in Financial Management Students' Copy
26/26
Responsibilities
Controller Accounting
Reporting financial information Custody of records
Interpreting financial data
Budgeting
Controlling operations
Appraising results and makingrecommendations
Preparing taxes
Managing assets Internal auditing
Protecting assets
Reporting to government bodies
Payroll
Treasurer Obtaining financing
Maintaining banking relationship Investing funds
Investor relations
Managing cash
Insuring assets
Fostering relationships with creditorsand investors
Appraising credit and collecting
funds Deciding on the financing mix
Disbursing dividends
Managing pension funds