Module 1 Flashcards
Is usually related to money. According to The American Heritage Desk Dictionary defines finance as the management of money, banking, investments and credit.
Finance
why is finance a science?
The use of factual information in the financial decisions and activities
why is finance an art?
financial practices do not remain static but become adaptive to the changes in the business environment.
Finance used to be considered an integral part of
economics
is concerned with the efficient utilization of scarce resources to satisfy human needs and wants.
Economics
Areas of finance
private finance
public finance
Is the management of financial resources of private individuals, non-government organizations, and private organizations in accordance with the prescribed financial policy and priority of the person or business organization.
private finance
Is the allocation of government income generated from either taxation or borrowings and the government expenditures based on the approved national and local appropriation or budget.
public finance
Private finance is subdivided into two:
Personal finance
Business finance
It is directed towards the management of personal resources of an individual.
Personal finance
is allocated on the individual’s personal needs such as household expenses, education, hospitalization, and acquisition of personal and real properties.
Income
Is an area of finance that focuses on the handling and management of financial resources of a business organization.
Business finance
Major divisions of business finance
Financial management
Financial investment
Capital market
Focusing on capital budgeting decision or investment decision on the acquisition of assets and its corresponding financing scheme.
financial management
Is an asset that you put money into with the hope that it will grow into larger sum of money.
Financial investment
Is an area of business finance that studies the different financial institutions and their functions that provide assistance to both and private borrowers of funds.
Capital market
four functional divisions are involved in business organization
- Production and operation divisions
- General administrative or human resource division
- Finance division
- Marketing division
handles the marketing, production and operation, and human resource function.
operating division
The finance division is headed by the
chief finance officer
elect the Board of Directors (BOD).
Shareholders
is the highest policy making body in a
corporation. The board’s primary responsibility is to ensure that the corporation
is operating to serve the best interest of the stockholders.
Board of Directors
responsibilities of the board of directors:
a. Setting policies on investments, capital structure and dividend policies.
b. Approving company’s strategies, goals and budgets.
c. Appointing and removing members of the top management including the
president.
d. Determining top management’s compensation.
e. Approving the information and other disclosures reported in the financial
statements (Cayanan, 2015)
b. Performing all areas of management: planning, organizing, staffing, directing
and controlling.
President (Chief Executive Officer)
Conducts or directs research that will allow the company identify new
marketing opportunities, e.g. variants of the existing products/services
already offered in the market.
VP for Marketing
Ensures production meets customer demands.
VP for Production
Assists other departments in hiring employees.
VP for Administration
is someone who determines the
appropriate capital structure of the company.
VP for Finance/Financial Manager
4 types Vice presidents of a business organization
VP for marketing
VP for production
VP for administration
VP for finance
refers to how
much of your total assets financed by debt and how much is financed by equity.
Capital structure
Expected to be the shock observer of the budgetary requests and requirements of other functional units of the business.
Finance Officer
What are the functions of Financial Manager?
- Operating decision
- Investing Decision
- Financing decision
- Dividend Policies
Are financial decisions affecting the routine operating activities of a business.
- Operating decision
Deals with choosing small and large projects with several investment opportunities.
- Investing Decision
Deals with raising or acquiring of funds from outside source and not from the ordinary results of the business operation
- Financing decision
is part of profits that are available for distribution, to equity shareholders.
Dividend
The Finance manager must decide whether the firm, should distribute all the profits or retain them or distribute a portion and retain the balance.
- Dividend Policies
Qualification of a finance officer
- Knowledge about Accounting and economics Principles
- Familiar with the operations of the other functional areas
- Technically equipped in Finance with professional Judgement
- With Good Communication
- With Favorable Relationship with Financial Institutions
6.With Harmonious Relationship with Other units
- Ethically and Socially Responsible
