Business Finance

Week 1
Major Roles in Financial
Management and
Individuals Involved
At the end of this lesson, you are expected to:
a. define what finance is and the underlying concepts
therein;
b. identify the individuals responsible for financial
management;
c. describe the primary activities of the financial
manager and how he
helps in achieving the goal of the organization;
d. determine what financial institutions, financial
markets and financial instruments are
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FINANCE

>is an act or process of

raising or providing funds

>is the science and art of

managing money.

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ADAM SMITH
• was a the development economist
and philosopher who was a pioneer
of political economy and key
figure during the Scottish
Enlightenment. Also known as
"The Father of Economics" or
"The Father of Capitalism"

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An organizational structure shows the roles and functions
of the employees in a company. Job descriptions and
functions may vary from different companies, depending on
its size, and form of organization, but basic and important
features of functions are common in nature. For example, in a
small business, the president or head of the company can
also directly perform the responsibility of the marketing,
finance and production managers, while in a big or very large
companies, there are Chief Financial Officers (CFO) or VP for
Finance that assumes the responsibility that contributes to
the good financial decisions and directly reports to the top
management; and other VP’s for specific departments

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Positions and their Roles:
1. Shareholders. Owners of shares in a
company. Each share held is equal to one
voting right. The shareholders elect the 2.
2. Board of Directors (BOD).
The highest policy making body in a
corporation. An elected group of
individuals that represent shareholders.
Manages the company.

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 Responsibilities of the Board of
Directors (BOD):

-• 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.

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President/Chief Executive Officer
(CEO).
Oversees the overall operations and
resources of the company. Ensures that
planned strategies as approved by the
board were implemented and executed.

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 Responsibilities of the President or CEO:
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.
•Carries out the decision making for all functions

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 VP for Marketing.
Directing and coordinating company’s sales, promotion, and
distribution of products.
Responsibilities of the VP for Marketing
•Formulates 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 reserach that will allow the
company identify new marketing opportunities.
•Promoting good relationships with customers and
distributors. (Cayanan, 2015

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VP for Production.
Ensures production meets customers
demand. Maximizing company’s
optimal operating performance.
Determines an effective production
plan with cost efficient and quality-
based output process that maximizes
the use of company’s production
facilities

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Responsibilities of the 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)

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VP for Administration.

Oversees the administrative task and

functions and develops strategies to
enhance staff’s performance.
Organize and manage the functions of
different departments in the firm.

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Responsibilities of the 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)
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Financial Management
Deals with decisions that are supposed to maximize the
value of shareholders’ wealth. (Cayanan)
• These decisions will ultimately affect the markets
perception of the company and influence the share price.
• The goal of financial management is to maximize the value
of shares of stocks
.

• Managers of a corporation are responsible for making the

decisions for the company that would lead towards
shareholders’ wealth maximization.

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Financial Management
refers to strategic planning,
acquiring, directing, and
controlling of financial
undertakings in an organization
in a way that it achieves its
goal.
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 Role of Finance Manager
Finance Manager’s responsibility includes
the allocation of funds to its current and
fixed assets and to strategize an ideal
mixture of debt and equity financing that is
suited for the firm as well as determining
the appropriate risk-return trade off in
order to achieve its goal of maximizing its
wealth for its shareholders.

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 Financing Decisions
Include making decisions on how to fund
long term investments (such as company
expansions) and working capital which
deals with the day to day operations of
the company (i.e., purchase of inventory,
payment of operating expenses, etc.).

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The role of the VP for Finance or the
Financial Manager is to determine the
appropriate capital structure of the company.
Capital structure refers to how much of
your total assets is financed by debt and how
much is financed by equity.

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 Investment Decisions
Investing is where to put your excess
cash to make it more profitable.
Expanding that definition, let us
include cash held taken from funds
as a result of financing decisions.
Investments may either be short term
or long term

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 Operating Decisions
Deal with the day-to-day operations of the company.
Working Capital is the main concern of
operating decisions. Managing the working
capital of the firm is a day-to-day activity
that ensures sufficient resources to continue
its operation and to avoid costly disruptions.
Working capital refers to short-term assets
and labilities of a firm
..

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 Dividend Policy
Shareholders return of
investment based on their
shareholdings were paid by
companies through cash
dividends

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