FINANCE IN DAILY LIFE A competent management looks attractive for it builds trust and confidence that the money

invested is in the good hands of the persons involved in the company.

In business, finance decision deals with racing or acquiring of funds from External Factors
outside sources and not from the ordinary results of business operation. In
other words, financing decisions are made when the business needs to borrow money.
These factors influence the general reaction of investors in making an investment decision. Its
Finance, on the other hand is defined as the science and art of managing money. (Gitman & effect is not only to a specific company but on all companies or a group of companies under similar
Zutter, 2012). It is also defined as the management of money and includes activities such as circumstances. Such factors are a result of the environment a company operates in rather than the
investing, borrowing, lending, budgeting, saving, and forecasting. decisions of the company’s management.
(https://corporatefinanceinstitute.com)

Budgeting is the act of estimating revenue (in from the allowance cap) and expenses over a period Given the factors that influence market price the next challenge that shareholders will face is
of time (in our case, in a monthly basis). on how they are going to achieve their objectives, thus it can be made true through financial
management.
FACTORS THAT INFLUENCE MARKET PRICE

There are two factors that affects market price and it can be grouped into factors that the
Financial Management
management can control and external factors that cannot be controlled by the management.
Controllable by Uncontrollable External
Management Factors Financial management deals with the decisions that are supposed to maximize the value of
• Profitability • Macroeconomic conditions shareholders’ wealth. These decisions will ultimately affect markets perception of the company and
influence the share price. The goal of financial management is to maximize the value of shares of
• Having a good liquidity and Profitability
• Political stability stocks. It also is focused on capital budgeting decision or investment decision on acquisition of
reasonable leverage position
Profit is a assets and its corresponding financing scheme.
• Prospects of the industry where
• Dividends measure of
the company operates
the The Role of Financial Management
• Competent management financial
which affects the
• General market sentiment
company’s operating
efficiency
• To ensure regular and adequate supply funds.
• Coming up with corporate plans
• Flow of foreign funds invested in • To ensure returns to shareholders through capital gains which is which are dependent
that improve the business upon the earning capacity and the market price of the share.
the Philippine stock market
prospects of the company.
performance of a company for a period of time. Although it is a major driver for increasing the • To ensure optimum funds utilization at least cost.
value of stock, an investor should not rely on profits alone.
As discussed earlier, it is possible that the company has profits but its cash flow is negative. Let • To ensure investment of funds in safe venture so that adequate rate of return can be
us try the sample problem below. achieved.

Good liquidity and reasonable leverage position.

• To design a sound capital structure by maintaining a fair composition of capital
through a balance between debt and equity capital. (De Guzman, A.A., 2019)
Liquidity and leverage refer to the company’s management of the type and amount of assets and
liabilities that it will hold in the course of its operations. Individuals Involved in Financial Management

Dividends.
Holders of shares receive dividends from a corporation as returns on their investments in form of
cash or other properties. Companies which have better dividend policies are generally more
attractive than companies who do not pay out dividends. Note that there may be times that
companies do not pay out dividends because of future expansions. Same with the other factors
affecting share price, dividend policies should go hand in hand with other factors in determining
market price. Competent management.
1. The senior leaders of an organization are responsible for all aspects of its financial
health. They are the ones understands the unit’s financial situation and do not allow
unintended deficits to occur. They are accountable for the resources entrusted to them
that includes the funds, facilities and recruitment of employees, even if the control and
tasks have been delegated to their staff, under command of responsibilities. Example:
Shareholders, and Board of Directors.
2. Unit heads are responsible for their internal financial management and to develop
budgeting, financial reporting and management practices. Units are encouraged to
develop an oversight process that builds on best practices. (De Guzman, 2019)
Managers of the corporation are responsible for making the decisions for the company
that would lead towards shareholders’ wealth maximization.
a. Example: Chief Executive Officer, VP for Production, Marketing, Finance,
Administration and the likes.