MODULE 2 - Functions of Financial Management Flashcards
To maximize the owner’s or shareholder’s wealth, the finance manager makes decisions involving..
(1) Planning
(2) Acquiring funds
(3) Utilizing funds
Responsibility of Financial management
(1) to allocate funds
(2) to obtain the best mix of financing alternatives
(3) to develop an appropriate dividend policy
Role of Finance manager
(1) oversee the financial health of an organization
(2) Ensure its continued financial viability
(3) supervise important functions
(4) prepare financial statements
(5) monitor financial details
(6) supervise employees who do financial reporting and budgeting
(7) review finanial reports
(8) seek ways to reduce costs
Coordinates the activities of the treasurer and the controller.
Vice President of Finance/ Chief Financial Officer
Handles cost and financial accounting
Controller’s office
Responsible for managing the firm’s cash and credit, its financial planning and capital expenditures.
Treasurer’s office
Relationship with other Key Functional Managers in the Organization
(1) Finance managers and Personnel Managers
(2) Finance managers and Production managers
(3) Finance managers and Marketing managers
(4) Finance managers and Material managers
is the pprocess of monitoring managers and aligning their incentives with shareholder’s goals.
Corporate Governance
Not active in participation in the operation of the business.
Shareholder
Handles day-to-day operations, and they know that their work is mostly unknown to investors.
Managers
Governing body of the company. Representaives of stockholder’s interest.
Board of Directors
Hired by the Board. Evaluates the management. Can also design compensation contracts to tie management’s salariesto firm performance.
CEO
SEC means…
Securities and Exchange Commission
BIR means…
Bureau of Internal Revenue
BSP means…
Bangko Sentral ng Pilipinas
Primary importance in any practice of finance.
Ethical behavior
Entity designed to organize raw materials, labor, and machines with the goal of producing goods/services.
Business firms
Forms of Organization
(1) Proprietorship
(2) Partnership
(3) Corporation
Owned by a single person who has complete control over business decisions.
Proprietorship
Advantages of Proprietorship
(1) Ease of entry and exit
(2) Full ownership/control
(3) Tax savings
(3) Few government regulations
Disadvantages of Proprietorship
(1) Unlimited liability
(2) Limitation in raising capital
(3) Lack of Continuity
Two or more persons agree to contribute capital or services to the business and divide the proft or losses that may be divided therefrom.
Partnership
Each partner has unlimited liability for the debts incurred by the business.
General Partnership
One containing one or more general partners and one or more limited partners.
Limited partnership
Advantages of Partnership
(1) Ease of formation
(2) Additional sources
(3) Management base
(4) Tax implication
Disadvantages of Partnership
(1) Unlimited liability
(2) Lack of Continuity
(3) Difficulty of transfeering ownership
(4) Limitation in raising capital.
Artificial being created by law and its legal entity separate and distinct from its owners.
Corporation
What are icluded the the Articles of Incorporation.
(1) Incorporators
(2) Name of the Corporators
(3) Purpose of the Corporation
(4) Capital Stock
(5) Authorized shares
Advantages of Corporation
(1) Limited Liability
(2) Unlimited life
(3) Ease in transferring ownership
(4) Ability to raise capital
Disadvantages of Corporation
(1) Time and Cost of Formation
(2) Regulations
(3) Taxes
