CHAPTER 1: Introduction to Financial Management
Introduction
Management is the process of achieving organizational
objectives. This involves planning, organizing, leading,
and controlling
- Planning – setting goals and developing strategies
and tactics to achieve them.
- Controlling – determining whether goals are being
met, and if not, what can be done. Performance
evaluation is a must in controlling.
- Decision Making – selecting one alternative from a
set of choices. Making the best choice depends on
the manager’s goals, the expected results from each
alternative, and the information available when the
decision is made.
Information provided to internal users are called
management accounting information, are done by
management accountants. Management accounting is an
indispensable part of the system that provides
information to managers- the people whose decisions
and actions determines the success or failure of the
organization.
Strategic Cost Management Defined
It is the application of cost management techniques
which aims to reduce costs while strengthening the
strategic position of a business. The company should
determine which costs support a company’s strategic
position. It would be beneficial to increase costs that
support the strategic position of the business.
The company should also identify which costs either
causes decline in the strategic position or have no
impact at all. Management needs to focus on reduction
initiatives so that they can provide input regarding how
certain costs should be incurred to support the
competitive position of the firm.
3 Ways to Institute Cost Management Techniques
1. Develop systems that would streamline the
transacting between corporate support departments
and the operating units.
2. Establish transfer pricing systems to coordinate the
buyer-supplier interactions between decentralized
organizational operating units
3. Utilize pseudo profit centers to create profit
maximizing behavior in what were formerly cost
centers.
Management Accounting Defined
Management Accounting is the process of identifying,
measuring, accumulating, analyzing, preparing,
interpreting, and communicating information that
helps managers fulfill organizational objectives. It is
designed to assist the organization’s managers, few
restrictions are imposed by regulatory bodies, and not
governed by GAAP.
Management Accounts should do all efforts possible
or must strive harder to recognize:
- What are the information needed by the managers
- Why these information are needed
- How these information be presented in the best
feasible form that will enhance the
understandability character of these reports to the
users
- How the information be given to the user in the
earliest time possible to be more useful to decision
making
Objectives of Management Accounting
- Providing managers with information for decision
making and planning
- Assisting managers in directing and controlling
operations
- Motivating managers toward achieving
organization’s goals
- Measuring performance of managers and sub-units
within the organization
Relationship of Management Accounting with
Financial and Cost Accounting as Provider of
Information
Accounting information is supposed to address 3
different functions
1. To provide information to external parties
2. To estimate the cost of products produced or
services rendered
3. To provide information useful for making decisions
and controlling operations
Cost accounting is the field of accounting that creates
an overlap between financial and management
accounting. It integrates with financial accounting by
providing product costing information for financial
statements, and with management accounting by
providing some of the quantitative, cost-based
information managers need to perform their
functions.
Cost benefit analysis – analytical process of comparing
the relative costs and benefits that results from a specific
course of action. Such information shall be provided
only if the cost of producing the information is less
than the benefit of having it.
BSA 2-3 || ACCO 20123 FINANCIAL MANAGEMENT
CHAPTER 1: Introduction to Financial Management

Format
1. Font Style: Abadi
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3. Margin: Narrow
4. Spacing: 1.0: Remove space before and after
paragraph
5. Paragraph: Justify
6. Layout Columns: 2
7. Subtopics in the chapter: Bold and underline
8. Important Points: Bold
9. Change the header according to the topic assigned
10. Do not put the names in the document. It will be in
the cover page created by Ilde.
11. Please disregard the information above. It is used
for presentation purposes only.

Deadline: May 10, 2021 || Monday, 12 nn.

BSA 2-3 || ACCO 20123 FINANCIAL MANAGEMENT