ROLE OF FINANCIAL

MANAGEMENT
LEARNING
COMPETENCIES
 Explain the major role of financial
management and the different individuals
involved.
OBJECTIVES
 define finance
Describe who are responsible for
financial management within an
organization
Describe the primary activities of the
financial manager
 FINANCE
is the study and discipline of money,
currency and capital assets.
the study of production, distribution,
and consumption of money, assets,
goods and services.
 SHAREHOLDERS
•The shareholders elect the Board of Directors
(BOD).
 Each share held is equal to one voting right.
Their responsibility is to carry out the objectives
of the shareholders otherwise, they would not
have been elected in that position.
BOARD OF DIRECTORS
The board of directors is the highest policy making body in a corporation. The
board’s primary responsibility is to ensure that the corporation is operating to
serve the best interest of the stockholders.
The following are among the responsibilities of the board of directors:
-Setting policies on investments, capital structure and dividend policies.
-Approving company’s strategies, goals and budgets.
-Appointing and removing members of the top management including the
president.
-Determining top management’s compensation.
-Approving the information and other disclosures reported in the financial
statements (Cayanan, 2015)
 PRESIDENT (CHIEF EXECUTIVE
OFFICER)
The roles of a president in a corporation may vary from one company
to another.
Among the responsibilities of a president are the following:
* Overseeing the operations of a company and ensuring that the
strategies as approved by the board are implemented as planned.
*Performing all areas of management: planning, organizing, staffing,
directing and controlling.
*Representing the company in professional, social, and civic activities.
 VP FOR MARKETING:
The following are among the responsibilities of VP for Marketing
-Formulating marketing strategies and plans.
-Directing and coordinating company sales.
-Performing market and competitor analysis.
-Analyzing and evaluating the effectiveness and cost of marketing methods
applied.
-Conducting or directing research that will allow the company identify new
marketing opportunities, e.g. variants of the existing products/services already
offered in the market.
- Promoting good relationships with customers and distributors. (Cayanan, 2015)
VP FOR PRODUCTION
The following are among the responsibilities of VP for
Production:
-Ensuring production meets customer demands.
-Identifying production technology/process that minimizes
production cost and make the company cost competitive.
-Coming up with a production plan that maximizes the
utilization of the company’s production facilities.
-Identifying adequate and cheap raw material suppliers.
(Cayanan, 2015)
VP FOR ADMINISTRATION
The following are among the responsibilities of VP for
Administration:
-Coordinating the functions of administration, finance, and
marketing departments.
-Assisting other departments in hiring employees.
- Providing assistance in payroll preparation, payment of vendors,
and collection of receivables.
-Determining the location and the maximum amount of office space
needed by the company.Identifying means, processes, or systems
that will minimize the operating costs of the company. (Cayanan,
2015)
 MESSAGE FROM THE CFOS
-Unilever: “Finance plays a critical role across every aspect of our business. We enable the business
to turn our ambition and strategy into sustainable, consistent and superior performance” - Jean-
Marc Huët (Unilever) –
-Jollibee: “It’s very exciting because you are not just thinking of today but what the company will
need in the future” - Ysmael V. Baysa (Morales, 2013)
-Globe Telecom: “Yesterday’s solutions are never adequate for the future” - Albert De Larrazabal
(Klobucher, 2015)
-SM Corporation: “Now, we don’t go out because we need funds. We go out because it’s an
opportunity.” – Jose T. Sio (Montealegre, 2015)
FUNCTIONS OF A FINANCIAL
MANAGER
-Financing
-Investing
-Operating
-Dividend Policies
FINANCING
INVESTMENTS

Short term investments:

1. Plan for expected excess in cash using Financial
Planning tools such as budgeting and forecasting
2. Choose which type of investment should it invest
in that would secure the best profits
Long term investments: Prepare a capital budgeting
analysis to determine if the long term investment
will be profitable
OPERATING
determine how to finance
working capital accounts such
as accounts receivable and
inventories (short term vs. long
term)
DIVIDEND POLICIES
-These determine when the company should declare cash
dividends.
TWO CONDITIONS BEFORE GIVING DIVIDENDS:
1. The company must have enough retained earnings
(accumulated profits) to support cash dividend
declaration.
2. The company must have cash.
FINANCIAL INSTITUTIONS

Sometimes called banking

institutions, are business entities that
provide services as intermediaries for
different types of financial monetary
transactions.
THREE MAJOR TYPES OF
FINANCIAL INSTITUTIONS
Depository institutions – deposit-
taking institutions that accept and
manage deposits and make loans,
including banks, building societies,
credit unions, trust companies, and
mortgage loan companies;
THREE MAJOR TYPES OF
FINANCIAL INSTITUTIONS
Contractual institutions –
insurance companies and pension
fund
Example: Philam Life, Insular
Life, Sunlife, Manulife
THREE MAJOR TYPES OF
FINANCIAL INSTITUTIONS
Investment institutions –
investment banks, underwriters, and other
different types of financial entities
managing investments.
Example: Col Finance, Citi, Security
Bank, Manulife, Coins.PH, Sunlife,
Unicapital, BDO, FirtsMetroSec, China
FINANCIAL INSTITUTIONS
Financial Institution - A "financial institution" includes
any person doing business in one or more of the following
capacities:
(1) bank (except bank credit card systems); 
(2) broker or dealer in securities; 
(3) money services business;
(4) telegraph company;
(5) casino;
FINANCIAL INSTRUMENTS
a contract that gives rise to a financial asset of one
entity and a financial liability or equity to the other.
It refers to any type of asset that can be traded by
investors, whether it’s a tangible entity like
property or a debt contract. Financial instruments
can also involve packages of capital used in
investment, rather than a single asset.
 DIFFERENT CATEGORIES TO
CONSIDER AS TO FINANCIAL
INSTRUMENTS
Equity-based financial instruments: the agreement
represents actual ownership of the asset
Debt-based financial instruments: the agreement
represents a loan made by the investor to the asset’s
owner
Foreign exchange financial instruments: the agreement
pertains to Forex currency exchange rates
TYPES OF FINANCIAL
INSTRUMENTS
Cash financial instruments
Cash instruments include things like deposits
and loans, as well as easily transferable
securities. This type of instrument is directly
influenced by the market, so any market
fluctuations will be directly reflected in the
cash asset’s value.
TYPES OF FINANCIAL
INSTRUMENTS
Derivative financial instruments
Derivative financial instruments are based on
underlying components like interest rates and
markets. Examples include assets like equity
options contracts, which derive value from
underlying stock.
FINANCIAL MARKETS
It referred to space, where selling and buying of
financial assets and securities take place.
It allocates limited resources in the nation’s
economy.
It serves as an agent between the investors and
collector by mobilising capital between them.
TYPES OF FINANCIAL
MARKETS
Over the Counter (OTC) Market – They
manage public stock exchange, which is not
listed on the NASDAQ, American Stock
Exchange, and New York Stock Exchange.
The OTC market dealing with companies are
usually small companies that can be traded in
cheap and has less regulation.
TYPES OF FINANCIAL
MARKETS
Bond Market – A financial market is a place
where investors loan money on bond as
security for a set if time at a predefined rate of
interest. Bonds are issued by corporations,
states, municipalities, and federal
governments across the world.
TYPES OF FINANCIAL
MARKETS
Money Markets – They trade high liquid and
short maturities, and lending of securities that
matures in less than a year.
TYPES OF FINANCIAL
MARKETS
Derivatives Market –They trades securities
that determine its value from its primary asset.
The derivative contract value is regulated by
the market price of the primary item — the
derivatives market securities, including
futures, options, contracts-for-difference,
forward contracts, and swaps.
TYPES OF FINANCIAL
MARKETS
Forex Market – It is a financial market where
investors trade in currencies. In the entire
world, this is the most liquid financial market.
CLASSIFICATION OF
FINANCIAL MARKET
By Nature of Claim
Debt Market – It is a market where fixed
bonds and debentures or bonds are exchanged
between investors.
Equity Market – It is a place for investors to
deal with equity.
CLASSIFICATION OF
FINANCIAL MARKET
By Maturity of Claim
Money Market – It deals with monetary assets
and short-term funds such as a certificate of
deposits, treasury bills, and commercial paper, etc.
which mature within twelve months.  
Capital Market –  It trades medium and long
term financial assets.
CLASSIFICATION OF
FINANCIAL MARKET
By Timing of Delivery
Cash Market –   It is a market place where
trade is completed in real-time.
Futures Market –  Here, the delivery or
compensation of products are taken in the
future specified date.
FLOW OF FUNDS
Flow of funds (FOF) are
financial accounts that are used
to track the net inflows and
outflows of money to and from
various sectors of a national
economy.