Introduction : the finance function

An organization, whether political, civic, or bsiness in nature must be aware of its immediate and future
requirements for funds, the possible sources thereof and the benefits that may accrue to the
organization itself and to the community arising from efficient and effective utilization of such funds.

PRIMARY GOALS:

Going into business means investing in activities that can make available goods and services needed in a
community, realize profit from investment, increase the values of bus. Itself as an economic entity, and
improve the quality of life in community. In other words, we fill an economic need, gain therefrom and
at the same time, contribute to the economic and social well-being of people in locality. The primary
goals of a business concern must be therefore be as follows:

 To earn profit
 To increase its own value as an economic entity
 To improve quality of life in community

TO EARN PROFIT

- Funds are invested in a bus to earn sufficient to return on investment.

EARNING PER SHARE ( EPS) . This refers to how much net income is earned for every share of capital
stock outstanding.

EPS = NET INCOME RELATED TO COMMON STOCK/ WEIGHTED AVERAGE NO. OF SHARES OUTSTANDING
OF COMMON STOCK

INCREASING THE VALUE OF A BUSINESS

- Growth and stability are the primary bases in measuring the value of a business entity. Growth
may be measured in terms of increase in assets that appreciate in value, improved production
capacity accompanied by increase in salesvolume and increase in owners’ equity.
- Stability of a company refers to its ability to weather the ups and downs in the economy or its
ability to continue operations despite anticipated risks in a business.

SOCIAL RESPONSIBILITY OF BUSINESSMEN

- Refers to his contribution to the improvement of quality of life in community.

- How the business is able to improve the economy and its environment
- He adheres to legal and moral standards by adopting company objectives, policies and practices
consistent therewith.

MULTIPLIER EFFECT OF BUSINESS IN A COMMUNITY

- Chain effects of bus activities.
BUSINESS FINANCE

The ff. are the functions of bus finance:

 Allocation of financial resources

 Procurement of funds
 Efficient and effective utilization of financial resources

ALLOCATION OF FINANCIAL RESOURCES

- The objective is to be assured that funds are channeled to activities that are considered
profitable or will increase the value of bus itself and the company costs and risks are minimized.
- Some question asked in evaluating project proposals:
Is that project necessary?
What is its social relevance?
How will the proposal affect our current operations?

PROCUREMENT OF FUNDS
- Requires awareness of diff sources of funds and the cost involved.

EFFICIENT AND EFFECTIVE UTILIZATION OF FINANCIAL RESOURCES

Efficient utilization of financial resources refers to their economical use. We see to it that fin
res arectually being used for what they have been intended. Inefficiency in the use of fin res
may be caused by unnecessary expenditures or tardiness of personnel.
Effective utilization of financial resources refers to their use towards the attainment of
predetermined goals/ objectives. Financial res must be utilized in a manner that minimizes
company costs arising from wastages and lost opportunities due to delays in operations and idle
or nonproductive res.

INVESTMENT PORTFOLIO

Portfolio refers to a brief case that is normally being used in carrying business papers and
documents. Because of this, the term came to be used as referring to the aggregate of assets
held as investments by an organization or individual.

A bus org may maintain investment in stocks, bonds, money market placements, real estate bec
of their periodic earnings or their increase in appreciation in value.