Business Administration Roles and Functions

Administration and Finance Functions

• Coordination of administrative, finance, and marketing departments is essential for efficient company operations.
• The Vice President (VP) for Administration assists in employee hiring across departments.
• Key responsibilities include payroll preparation, vendor payments, and accounts receivable management.
• The VP for Finance determines the company's capital structure, balancing debt and equity financing.

Financial Manager Functions

• Financing Decisions: Focuses on long-term investments and working capital management.
• Investing Decisions: Involves capital budgeting analysis to support long-term investment decisions.
• Operating Decisions: Addresses daily operations, particularly in funding accounts receivable and inventory.
• Dividend Policies: Financial managers decide on the distribution of profits to shareholders or retention for reinvestment.

Financial System Overview

• Financial Institutions: Companies providing a wide range of services such as banking, insurance, and investment management.
  • Commercial Banks: Accept deposits, offer commercial and personal loans, and purchase government and corporate debt securities.
  • Insurance Companies: Offer protection via premiums collected and invest these funds until claims are paid.
  • Mutual Funds: Allow small investors to partake in a diversified portfolio managed by professionals.
  • Pension Funds: Receive employee contributions and invest them for future payouts.

Financial Instruments

• Represent legal agreements with monetary value, includes debt and equity securities.
• Financial assets can include cash, equity instruments, or contractual rights for future cash flows.
• Financial liabilities involve obligations to pay cash or deliver financial instruments.
• Equity Instruments: Represent residual interest in a company's assets.
  • Examples include ordinary and preference shares.
• Debt Instruments: Generally fixed returns, includes treasury bonds, bills, and corporate bonds.

Financial Markets

• Marketplace for trading financial assets such as stocks, bonds, and derivatives.
• Primary Markets: Where new securities are issued through public offerings or private placements.
• Secondary Markets: Allow trading of existing securities, exemplified by the Philippine Stock Exchange (PSE), which operates as both primary and secondary markets.

Market Classifications

• Money Markets: Trade in short-term securities (one year or less).
• Capital Markets: Involve longer-term securities such as bonds and stocks.
• Money markets facilitate temporary borrowing/lending, whereas capital markets facilitate long-term investments and ownership exchanges.

Shareholding and Investments

• Investing in stocks allows individuals to own part of a corporation, providing potential growth and return on investment.
• Shareholders profit from dividends or stock price increases, illustrating the relationship between company performance and investor returns.