BUSINESS FINANCE

FINANCE – management of money (investing, lending, borrowing, budgeting, saving)

FINANCIAL MANAGEMENT – planning, organizing, directing, controlling financial activities

ROLES OF FINANCIAL MANAGER – performs data analysis and advise senior managers on profit
maximizing ideas.
 Raising of funds – responsibility of financial manager
 Allocation of funds - allocated in such a manner
 Profit planning – prime functions of any business
 Understanding capital market – stock exchange & continouos sale & purchase history
ROLES OF FINANCIAL MANAGER
 Providing & interpreting financial information
 Formulating strategic and long-term business plan
 Developing Financial management mechanisms that minimize financial risk
 Managing financial/accounting
 Keeping abreast of changes in financial regulations
FINANCIAL MANAGEMENT
 Financial controls
 Financial planning
 Capital management
 Allocation utilization of financial resources
 Cash flow management
 Disposal of surplus
 Financial/reporting
 Risk management
FINANCIAL INSTITUTIONS – offers banking, insurance and investment
A. Depository Institution - accept monetary “deposit”
- Commercial bank, savings bank, credit unions, saving and loans
B. Non Depository – doesn’t accept deposit
- Insurance companies, mutual funds, pension funds
FINANCIAL INSTRUMENT – documents can be debt securities or it can be bonds
- Financial assets, financial liability, equity instrument, debt instrument
Types (deposits, borrowings, loans, shares & other equity
INFLOW – INCREASES OUTFLOW – DECREASES
INVESTING – NCA acquisition & disposal FINANCING – where funds came
DIVIDEND – Surplus OPERATING – payment to supplies , payments for expenses
FINANCIAL MARKET – PHILIPPINE STOCK EXCHANGE (PSE) -it describes of securities such as shares,
bonds, and currencies occur
FLOW OF FUNDS -changes in working capital of the movement or changes of funds, includes any increase or
decrease in funds.
OPERATING ACTIVITIES – payments from clients, payments for expenses
INVESTING ACTIVITIES – disposal
FINANCIAL ACTIVITIES – loans, + additional, - dividends
FINANCIAL PLANNING – guide for financial aspects
FINANCIAL PLANNING PROCESS
Set goals or objectives
Identify resources
Identify goal related tasks
Establish responsibility centers for accountability and timeline
Establish evaluation system for monitoring and controlling
Determine contingency plan
WHY IS IT IMPORTANT?
-to ensure adequate funds
-ensure reasonable balance between inflow and outflow
-ensure financial growth and expansion programs for the company
-reduces uncertainties with regards to changing markets
-helps reduce uncertainties that can be a hindrance to the growth of the company
2 Parts of Financial Planning
LONG TERM FINANCIAL PLANS – overall direction SHORT TERM – setting sales forecast
PLANNING-serve as a blueprint, attributed to steps, serve as guide, roadmap
LTP-made by the top management STP-distances within 12 months
BUDGET-a statement of projected sales, expenses, and other transactions for the coming period. It is a firm’s
plan , serve as a tool for planning and a tool for control.
Types Of Budget
o SALES BUDGET
o PRODUCTION BUDGET
o DIRECT MATERIALS BUDGET
o DIRECT LABOR BUDGET
o FACTORY OVERHEAD BUDGET
o SELLING AND ADMINISTRATIVE EXPENSE BUDGET
o INCOME STATEMENT

*OPERATING BUDGET – detailed projection of all income and expenses for a given period.
FINANCIAL BUDGET – shows the impact of the planned operations and capital investments on a firm’s asset,
liabilities and owner’s equity (CASH BUDGET, SFP)
PREPARING THE BUDGET
 Preparation of sales forecast
 Determine production volume in support of the sales forecast
 Estimate manufacturing costs and operating expenses
 Estimate cash flow
 Prepare financial statements
5 c’s of CREDIT
CHARACTER – references/background
COLLATERAL – default repayment rate (amortization, interest)
CAPACITY – income, expenses
CONDITIONS - % interest, month
CAPITAL – savings, assets