FINANCIAL MANAGEMENT Role of Financial Managers expressly authorized by law or incident to its

Before – a finance manager was only involved in o Investment existence.

simple bookkeeping & payments of the company’s o Financing Agency theory – a potential conflict of interest
bills. o Dividend policy between the stockholders & managers.
Present – evolved deeply into the major parts of the Vice President – Finance Primary agency relationships:
firm’s activities, a role that develops critically to what Controller o Stockholders & managers
is now known as financial management. o Accounting & financial reporting o Stockholders & creditors
Concerned with: o Internal audit **restriction on declaring dividends, issuance of
1. Raising o Cost accounting bonds, accumulating of capital assets.
2. Allocating o Tax accounting Misconceptions of FM:
3. Controlling – the firm’s funds o Planning for control o FM is accounting
Firm’s goal – to maximize stockholder’s wealth is o Evaluating & consulting o FM is a review of mathematics
through the value of their ordinary share. o Government reporting o FM is a branch of statistics
Why not maximize profit? o Protection of assets
o A change in profit = change in risk
o Economic appraisal
o Accounting profits cannot be measure
Treasurer
accurately o Cash management
o Fails to determine the timing of benefits
o Banking relationship
o Sources of financing
o Financial planning
o Investment planning
In profit maximization, the timing of the o Capital management
benefits is not considered. They do not care if
o Risk management
the cash flow is higher/lower in the early years
o Investor relations
of the project.
o Credits & collections
Determinants of Intrinsic Values & Stock Prices
Forms of Business Orgs
1. Sole proprietorship
2. Partner (2 or more)
3. Corporation – it is an artificial being created by
operation of law having the right of succession
& the powers, attributes & properties