MODULE 6

FINANCIAL MANAGEMENT
*** CONCEPT OF FINANCIAL MANAGEMENT ***
Objectives:
1. Discuss the business function of finance.
2. Identify and explain the basic steps of financial planning.
3. Appreciate the fundamental objectives of financial planning to maximize benefits.

Learning Content:

Business Functions of Finance.

“Financial Management”, involves the solution of three problems: Investments,
Financial and Dividends.
Management aims to resolve all these three problems in relation to the basic
objectives of the enterprise. An optimal combination of three decisions will maximize benefit to the
company’s stockholders.

Investment decision are always crucial. Capital budgeting which is the most
important aspect of investment decisions.
Financing decision is concerned primarily with the determination of the most
advantageous capital structure for the company, and with the procurement of the funds. In
this chapter, the managerial aspect of financing is taken up with particular emphasis on
management of working capital.
Dividend-decision making. This encompasses the percentage of earning paid to
stockholders, the regularity of payment of dividends in cash and distribution of stock
dividends, and re-purchase of stock.

Financial Planning. The act of deciding in advance the financial activities necessary to
achieve primarily goals of the firm is itself “financial planning”. This involves the three basic
concepts:

1. Determining both long and short-term financial objectives.

2. Formulating and establishing financial policies and,
3. Developing procedures which aid in the promulgation of company policies.
The fundamental objective of financial planning is to secure and employ capital resources in
such a way as to maximize benefits. In the determination of financial policies which will guide the
staff in achieving the firm’s primary objective, the following must be considered.
 1. Amount of capital required;
2. Use of debt and equity capital;
3. Selection of the sources of funds;
4. Distribution of income;
5. Credit and collection procedures;
6. Amount necessary for fixed and for working capital.
Financial Control. An important managerial function assigned to the financial manager is
“financial control”. This consists of at least three basic steps, namely:
1. Establishing standards of performance;
2. Comparing performance with established standards; and
3. Adopting remedial measures whenever unfavorable deviation occur.
The Treasurers as Chief Finance Officer. The size of the firm and volume of its operations
affect the extent of the functions of the financial manager. Thus, the functions of larger firms are
highly organized, while in small companies such functions may not even be visible.

Learning Activity:

Define and explain the finance function assigned to the treasurer:

A-A. TREASURER AS FINANCIAL MANAGER.

A.1 Receivables Management.
A.2 Cash Management.
A.3 Capital Expenditures
A.4 Banking Relation
B-B.
B.1. Real Estate
B.2. Dividends
B.3. Securities
Learning Assessment:

Draw the Organizational Chart of the Finance Function.

RUBRICS/CRITERIA:
Order of Chart Presentation------------ 90%
Neatness-------------------------------------10%
TOTAL-------------------------------------- 100%

Required Materials:
1. Short bond paper
2. Font size=11, font style =Calibri.

Reference:
Management Accounting
V. A. Francisco
Accounting
Win Ballada, CPA, MCA