Financial Management

Roles of Financial Managers

1. Investing funds in assets
2. Promulgating the best mix
of financing and dividends in
relation to overall valuation of
the firm.
 Questions that FM seeks to answer
1. What percentage of funds needed
by a business should be obtained from
borrowing and what percentage from
the owners?
2. What percentage of the annual
profits should be paid out to
shareholders as dividends?
 Financial Accounting
Concerns primarily in describing the
financial resources, obligations and
activities of an economic entity
resulting to the preparation of
general-purpose financial reports on
financial position and operating
results.
 Financial Statements
The accountant’s reports
which are considered the “end
products” of the accounting
process are called financial
statements.
 Financial Statements
The volume of records and documents
that are being gathered and kept by the
business from the one-month period up to
one whole year are daily recorded,
classified, summarized, processed and
transformed or converted into two reports-
Balance Sheet and Income Statement.
 Balance Sheet
Statement of Financial
Position is a statement which
shows the financial condition of
the business as of a given date.
It shows the asses, liabilities
and Owner’s Equity.
 Balance Sheet
Tells us the following information:
How much the business owns? (referring
to the assets)
How much the business owes? (referring
to the liabilities)
How much is left for the business?
(referring to the equity)
 Income Statement
The Income Statement shows
the “Results of Operations”. It
shows the revenue and
expenses for a given period.
Profit (loss) is the excess of
revenue over expenses.
 Income Statement
Does the business make profit?
Does the business incur loss?
Does the business in a breakeven status?
Can I afford to hire additional
employees?
What costs can I cut-down to maximize
profit?