CHAPTER 2: Relationship of Financial Objectives to
Organizational Strategy & Other Organizational
Objectives
What is an objective?
- Something toward which effort is directed.
- In a business setting, these are the specific and
measurable results companies hope to achieve.
- Objective setting is an important phase in the
business operation since it serves as a structure
of strategies, policies and plans of a company.
What is strategic financial management?
- SFM brings financial management and strategic
management together and provides financial
criteria for management decisions.
- An approach used for managing the finances of
a company to meet its strategic goals.
- It involves financial planning, financial
forecasting, provision of finance and formulation
of finance policies which should lead the firm's
survival and success.
example scenario:
Goal: maximization of shareholders' wealth.
Strategic plan: make an additional investment
Financial management: allocation of funds to finance
the strategic plan.
FINANCIAL OBJECTIVES OF A BUSINESS
ORGANIZATION
Financial Objectives
- The goals or targets related to the financial
performance of a business.
- Usually in quantitative terms and are set within a
time frame.
1. Short and Medium-Term Financial Objectives
● Maximization of return on capital employed or
return on investment.
- Assess the viability of an investment
before providing capital.
● Growth in earnings per share and price/earnings
ratio through maximization of net income or
profit and adoption of optimum level of leverage.
- The business shall have the capability to
make continuous growth so investors
can put their trust into it.
● Minimization of finance charges.
- In acquiring debt financing, managers
should be mindful if the interest charges
are reasonable and the business is
capable of paying it.
● Efficient procurement and utilization of short-
term, medium-term, and long term funds.
- Maximization of a company's resources
through effective and efficient allocation.
2. Long-Term financial objectives
(juliana's part)
RESPONSIBILITIES TO ACHIEVE THE FINANCIAL
OBJECTIVES
1. Investing
Deals with managing the firm's assets.
Following are the examples of investing decisions of
financial managers.
a. Evaluation and selection of capital investment
proposals.
b. Determination of the total amount of funds that a
firm can commit for the investment
c. Prioritization of investment alternatives
d. Funds allocation and its rationing
e. Determination of the levels of investments in
working capital (i.e. inventory, receivables, cash,
marketable securities and its management)
f. Determination of fixed assets to be acquired
g. Asset replacement decisions
h. Purchase or lease decisions
i. Restructuring reorganization mergers and
acquisition
j. Securities analysis and portfolio management
2. Financing
(juliana's part)
3. Operating
(Jayvee's part)
ENVIRONMENTAL "GREEN" POLICIES & THEIR
IMPLICATIONS FOR THE MANAGEMENT OF THE
ECONOMY & FIRM
(Jayvee's part)
 CHAPTER 3: Functions of Financial Management product.

ROLE OF FINANCE MANAGER MANUFACTURING AND MARKETING

Figure below shows the financial manager's role in Critical for the survival of a firm because these two areas
achieving the primary goal of the firm. determines what will be produced and how these
product will be sold.
FINANCE
-Concerned with all of the monetary aspects of a
business.
-Integral part of total management and cuts across
functional boundaries.

Financial managers must interact with other managers to

ascertain the goals that must be met.

CORPORATE GOVERNANCE
-process of monitoring managers and aligning their
incentives with shareholders goal.
FINANCE ORGANIZATION
Figure below is a sample of a simplified organization CORPORATE GOVERNANCE
chart.
BOARD OF DIRECTORS
-monitors inside a public firm
-appointed to represent shareholders’ interest.

The board hires the CEO to evaluate management and

can also design compensation contracts to tie
management’s salaries to firm performance.

EXTERNAL AUDITORS
-examines the firm’s accounting systems and comment
on whether financial statements are fairly represent the
firm’s financial position.

RELATIONSHIP WITH OTHER KEY FUNCTIONAL
MANAGERS IN THE ORGANIZATION
-Finance is one of the major functional areas of a
business.
EXAMPLE
The functional areas of the business operations for a
typical manufacturing firm are MANUFACTURING,
MAKETING AND FINANCE.
MANUFACTURING
Deals with the design and the production of a product.
MARKETING
It involves the selling, promotion and distribution of a
INVESTMENT ANALYSTS
Keep tact the performance of the firm, conduct their own
evaluation of the company’s business activities and
report to their investment community.
INVESTMENT BANKS
-helps the firm to access the capital markets.
-monitors the performance of the firm.
CREDIT ANALYSTS
-examines the firm’s financial strength for its debt
holders.
GOVERNMENT
-monitors business activities through SEC, BIR and BSP
and so forth.
ETHICAL BEHAVIOR

ETHICS
- primary importance in any practice of finance.

Corporate managers control the stockholders firm,

bank employees perform cash receipts and
disbursement functions and investment advisors
manage people’s investment portfolios strong
emphasis on ethical behavior and ethics training and
standards are provided by these professional
associations.

1. Finance executives of the Philippines

2. Bankers association of the Philippines

3. Investment professionals and so forth.

Corporate governance system has created its ethical

dilemma and has failed to prevent unethical
managers from stealing from firms which ultimately
means stealing from owners or stockholders