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Questions and Answers
Identify the three major types of decisions that a finance manager makes.
The three major types of decisions are capital budgeting, capital structure, and working capital management.
How does financial management relate to accounting and economics?
Financial management involves making informed financial decisions, whereas accounting provides the financial data needed and economics analyzes market behavior.
Explain the significance of financial management in a business context.
Financial management is crucial for planning, acquiring, and utilizing funds effectively to achieve a firm's goals.
What is the primary goal of financial management?
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What are the ethical implications of financial decisions?
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What are the main commitments of the Philippine Business Groups (PBGs) to their employees?
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How do the PBGs commit to treating their suppliers?
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What role does environmental consideration play in the PBGs' commitments?
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What is a key responsibility of a financial manager according to the traditional view of Financial Management?
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How does the modern approach to financial management differ from the traditional view?
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Study Notes
Course Outcomes
- Analyze and evaluate emerging trends in financial management.
- Apply advanced concepts to solve real-world financial problems.
- Make informed financial decisions across various industries.
- Communicate effectively about financial topics to diverse audiences.
- Understand ethical implications of financial decisions.
- Identify and assess risks associated with financial transactions, developing mitigation strategies.
Basic Principles of Financial Management
- Financial management, or managerial finance, focuses on planning, acquiring, and utilizing funds to achieve business goals.
- This discipline encompasses facts, principles, and theories about money management by individuals, businesses, and governments.
Goal of Financial Management
- Primary goal is to maximize the current value per share of existing stock, thus adding value for the owners.
- Financial managers must act in the best interests of shareholders by making value-increasing decisions.
Shared Prosperity and Commitments
- On Nov. 5, 2020, major Philippine business associations formed a Covenant for Shared Prosperity, emphasizing a commitment to national development.
- Commitments include:
- Employees: Provide equitable treatment, training, and work-life balance.
- Customers: Deliver quality products and services.
- Suppliers: Ensure fair and respectful treatment.
- Community: Engage actively and support disadvantaged individuals.
- Environment: Utilize eco-friendly technology for sustainability.
- Stockholders: Ensure fair returns and treatment for all shareholders.
Scope of Financial Management
- Traditional functions include:
- Procurement of short- and long-term funds.
- Mobilization of funds via various financial instruments.
- Compliance with regulatory provisions and coordination with accounting.
Types of Financial Decisions
- Financial managers engage in three core decision types:
- Investment Decisions: Focus on allocating resources efficiently to projects with positive net present values.
- Financing Decisions: Involve choosing an optimal mix of debt and equity to maximize investment value.
- Dividend Decisions: Determine profit distribution while retaining sufficient funds for future growth.
Significance of Financial Management
- Broad Applicability: Finance principles apply to all scenarios involving cash flow, crucial for organizational health.
- Reduction of Failure Risk: Effective financial management is essential, regardless of technological or marketing capabilities.
- Return on Investment Measurement: Evaluates expected cash flows considering timing and associated risks to maximize owners' wealth.
Relationship Between Financial Management, Accounting, and Economics
- Financial Management and Accounting: Financial management goes beyond bookkeeping, leveraging financial statements for informed decision-making regarding cash utilization and resource allocation.
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Financial Management and Economics: Understanding economic factors (micro and macro) enhances financial planning and response strategies.
- Microeconomics: Focuses on individual and firm-level economic decisions.
- Macroeconomics: Examines broader economic factors impacting financial strategies.
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Description
This quiz focuses on advanced concepts in financial management, analyzing emerging trends, and applying techniques to real-world scenarios. Students will demonstrate their ability to make informed financial decisions and communicate these concepts effectively to various audiences. Engage with content that enhances your financial acumen in diverse industries.
