BUSINESS FINANCE 12

NAME: John Rey A. Busime DATE: 8/28/2021

Topic:
ORGANIZATIONAL CHARTS AND THE ROLES OF A VICE
PRESIDENT FOR FINANCE

Objectives:
At the end of the week, I will be able to:
a. Understand the function of an organizational chart
b. Understand and highlight the roles of a Vice President for Finance

Key Concepts:

Finance Manager
Organizational Chart
Functions
Organization

Fuel – Up:

“Beware of little expenses. A small leak will sink a great

ship.”

- Benjamin Franklin

How do you think these words of Benjamin Franklin influences the role of a
Finance Manager in an organization?

Discussion:
 A Typical Organizational Chart

Board of Directors
The board of directors 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 stakeholders. The members of the board who are called directors are
elected by the stakeholders. The ability to elect the director in the board is contingent on
the amount of shares owned and the number of directors in the board. To illustrate,
assume that there are ten directors in the board. If a stockholder owns 10% of the
voting shares of the company, then this stockholder can elect one director in the board.
This is the reason why some investors want to own the majority shares of a company if
they want control over the company. Owning majority of the shares means having the
right to elect majority of the directors in the board.
The following are among the responsibility of the board of directors:
1. Setting policies on the investments, capital structure, and dividends.
2. Approving company’s strategies, goals, and budgets.
3. Appointing and removing members of the top management including the
president.
4. Determining top management’s compensation
5. Approving the information and other disclosures reported in the financial
statements

President
The roles of a president in a corporation may vary from one company to another.
Among the responsibilities of a president are the following:
1. Overseeing the operations of a company and ensuring that the strategies as
approved by the board are implemented as planned.
2. Performing all areas of management: Planning, organizing, staffing, directing,
and controlling
3. Representing the company in professional, social and civic activities.
 4. The president cannot manage the company on his own, especially when the
corporation has become too big. To assist him are the vice presidents of different
functional areas: finance, sales and marketing, production and administration.
VP for Sales & Marketing
The following are among the responsibilities of VP for Sales and Marketing:
1. Formulating marketing strategies and plans
2. Directing and coordinating company sales
3. Performing market and competitor analysis
4. Analyzing and evaluating the effectiveness and cost of marketing methods
applied
5. Conducting or directing research that will allow the company to identify new
marketing opportunities, for example, variants of the existing products/services
already offered in the market
6. Promoting good relationships with customers and distributors
VP for Production
The following are among the responsibilities of VP for Production:
1. Ensuring production meets customer demands
2. Identifying production technology/process that minimizes production cost and
makes the company cost competitive
3. Coming up with production plan that maximizes the utilization of the company’s
production facilities
4. Identifying the adequate and competitively priced raw materials suppliers
VP for Administration
The following are among the responsibilities of VP for Administration:
1. Coordinating the functions of administration, finance, and sales and marketing
departments
2. Assisting other departments in hiring employees
3. Providing assistance in payroll preparation
4. Determining the location and the maximum amount of office space needed by the
company
5. Identifying means, processes, or system that will minimize the operating costs of
the company
VP for Finance
Shown in Figure 3 are the functions of VP for Finance.
Financing Decisions
Financing decisions include making decisions as to how to finance long-term
investments and working capital which deals with the day-to-day operations of the
company.
The VP for finance is also responsible for determining the appropriate capital structure
of the company, that is, how much of the total assets should be financed by debt and
equity. This responsibility is crucial because if the company is aggressively financed,
that is, it is heavily financed by debt, the company becomes vulnerable to adverse
economic conditions which may result in higher volatility in earnings. The company can
get bankrupt because of too much debt.
Capital structure decisions vary from one company to another. It is affected by the
stability of cash flows, extent of fixed operating expenses and variable expenses.
Companies which are capital intensive and are characterized by high-fixed operating
expenses such as utility and mining companies are supposedly more conservatively
financed. This means, these companies have to be financed more by equity. These
companies have to generate high levels of revenues before they can cover their
expenses. If these companies are heavily financed by debt, then interest expense adds
up to the already high-fixed operating expenses. This would mean higher revenues for
profits to be made.
Investing Decisions
To minimize the probability of failure, long-term investments have to be supported by
capital budgeting analysis which is among the responsibility of a finance manager.
Capital budgeting analysis is a technique used to determine the financial viability of a
long-term investment. This requires forecasting the cost of investment and the streams
of cash flows expected to be generated from the investment. The investment can only
be considered if it satisfies certain financial parameters that are acceptable to the top
management.
This function of a finance manager is crucial. Many companies which suffered financial
distress went through an aggressive expansion heavily financed by debt. Among the
local companies which suffered a major setback because of aggressive expansion are
Metro Pacific Corporation with respect to their Fort Bonifacio Global City development
project and Belle Resources as regards their initial venture in the casino business. Both
companies implemented these expansions right before the 1997 Asian financial crisis.
Operating Decisions
Operating decisions deals with the daily operations of the company. This role of the VP
for Finance is determining how to finance working capital accounts such as accounts
receivables and inventories. Should the company finance these two accounts
substantially by short-term sources of financing or through long-term sources of
financing?
The decision regarding the financing of these working capital accounts depend in the
appetite of top management for risk. If the company is more aggressive, then these
accounts receivables and inventories can be substantially financed by short-term
sources.
Basically, short-term sources of funds are cheaper. Interest on short-term loans is
generally lower than interest on long-term loans. Hence, using short-term loans can
boost the profitability of a company.
While financing through short-term sources of financing may minimize the financing cost
of the company, this however, has a trade-off. Financing working capital accounts
mostly through short-term sources may expose the company to a liquidity problem
where obligations are already due but the company does not have sufficient cash to pay
for the obligations.
A more conservative management will opt to finance working capital accounts mostly
through long-term sources.
Dividend Policies
Some investors buy stocks because of the dividends they expect to receive from the
company. Non-declaration of dividends may disappoint these investors. PLDT and
Globe are two of the Philippines-listed companies which have generously distributed
cash dividends for the last five years.
Two conditions must exist before a company can declare cash dividends. First, the
company must have enough retained earnings to support cash dividends declaration.
When cash dividends are declared, the retained earnings of a company go down to the
extent of such declarations. Second, the company must have cash.
How much cash dividends a company declares is within the purview of the VP for
Finance. There are several factors considered in declaring cash dividends. Listed below
are among these considerations:
1. Availability of investment opportunities. This is especially true for small and
medium enterprises (SMEs) which access to long-term sources of funds is limited.
These SMEs may rely heavily on internally generated funds to finance expansion.
Hence, the decisions to declare cash dividends can be substantially influenced by the
availability of investment opportunities.
2. Access to long-term sources of funds. Publicly listed companies like PLDT,
Globe, or Petron have better access to long-term sources of funds. These companies
can afford to declare cash dividends even if they are faced with huge amounts of
investments, for as long as their retained earnings can support such declarations. The
reason is these companies are big, publicly listed, and have much better access to long-
term sources of funds.
3. Capital structures. The capital structure of a company can depend largely on the
nature of its business. As previously stated, companies which are capital intensive have
to be more conservatively financed. Therefore, the amount of cash dividends to be
declared depends on how such declaration can affect the capital structure of the
company.

Comprehension:

Why the board of directors is the highest policy-making body in a

corporation?
Because it establishes our company's vision, mission, values, and
strategic direction. It creates and implement policies to be upheld
by company management and resolve major company problems.
How is a director elected on the board of directors?
While members of the board of directors are elected by shareholders,
which individuals are nominated is decided by a nomination committee.
Ideally, directors' terms are staggered to ensure only a few directors
are elected in a given year.
Identify the four important roles of a finance manager and explain each
function briefly.

Financing- they create financial reports.

Investing- They direct their organization's budgets to meet its financial
goals and oversee the investment of funds.
Operating- Financial managers are responsible for the financial health
of an organization. They produce financial reports, direct investment
activities, and develop strategies and plans for the long-term financial
goals of their organization.
Dividend Policy- One of the most important financial decisions that a
Financial Manager must make is related to the company's dividend
policy. Specifically, it is necessary to determine if generated earnings
will be reinvested in the company to improve operations or if they will
be distributed among shareholders.

Exercises:

TOPIC QUESTIONS AND ACTIVITIES

Direction:

1. Look for 3 prominent VP for Finance in major corporations here in the

country and research about their profile, particularly their experiences and
contributions to their company.
 Ysmael Villoso Baysa – VP of finance of Jollibee. He serves as Chief
Finance Officer, Compliance Officer of the Company. He is Chief Financial
Officer and Compliance Officer.

Paul Fenwick - Vice President, Finance of Unilever. He is also the Finance

lead for Unilever's UK and Irish Business Units
Board Member of Unilever UK LTD
Board Member of Unilever Ireland
Board Member of Pukka Herbs
Board Member of Graze (Direct to Consumer & Retail business acquired
by Unilever)
Chair of Unilever's European Finance Leadership Team (& People
Development Forum)
Owner and Director of Brabourne Wine

Mark Atkinson
VP Finance, Meals Division at Nestlé. Experienced Finance VP with
proven track record of driving change in the Food and Beverage industry.
Skilled in Business Process Improvement, Forecasting, Business
Planning, Reporting and Analytics.
Member of the Chartered Institute of Management Accountants, BA
(Hons) Economics from University of Portsmouth.

2. Interview someone in your family or community who is a finance manager

or a treasurer of a company either thru messenger or phone call and ask
him/her what are his/her functions in the company where he or she works.

The interviewee says that she as a Financial managers generally oversee

the financial health of an organization and help ensure its continued
viability. They supervise important functions, such as monitoring cash
flow, determining profitability, managing expenses and producing accurate
financial information.

Thought of the Day/ Reflection:

Among the roles of a Vice President for Finance, which do you

think applies to your own reality in your personal life and how
does it apply in particular?

Write your answers on the space provided below.

What applies tom my own reality and personal life is leading and
managing the budgeting process. I like leading and managing
since I have skill for that. I want to responsible for processing the
financial activities of an organization to maximize a company's
profits and plan for its growth. The role includes analyzing data
and advising top executives on ways to use that information to
make strategic decisions about the organization's future.

References/Sources/Websites:
Business Finance, Arthur S. Cayanan; Daniel Vincent H. Borja

Prepared by:
Eric John D. Tendero, LPT