Business Finance Handout PDF

ARELLANO UNIVERSITY Andres Bonifacio Campus Pag asa st., Caniogan Pasig City HANDOUTS NO.1 LESSON 01: BUSINESS FINANCE 1. GITMAN & ZUTTER, 2012: Finance is the science and art of m...

ARELLANO UNIVERSITY Andres Bonifacio Campus Pag asa st., Caniogan Pasig City HANDOUTS NO.1 LESSON 01: BUSINESS FINANCE 1. GITMAN & ZUTTER, 2012: Finance is the science and art of managing money. Through Finance, risks are lessened which can possibly lead into Financial Loss. 2. GUTHUMANN AND DOUGALL: Finance is an activity concerned with planning, developing, managing, administering and increasing of the capital used for business purposes. Finance is considered as management of business capital. Financial managers are expected to do specific measures to manage capital through different financial means. 3.IVAN THOMPSON Finance comes from the Latin “finis” which means end or finish. Its implications affect both individuals and businesses, organizations and states it has to do with obtaining and using or money management. Finance does not only concern business organization but also touches individual aspects. According to Cayanan (2017) Financial Management concerns with that DECISIONS that are supposed to maximize the value of shareholder’s wealth. MAXIMIZING THE VALUE OF SHARE HOLDER’S WEALTH IS THE MAIN GOAL OF THE BUSINESS ENTITY. These decisions will ultimately affect the markets perception of the company and influence the share price. Managers of a corporation are responsible for making the decisions for the company that would lead towards shareholder’s wealth maximization.  The organizational structure deals plays a huge role in managing the financial aspects of the business. The following are the individuals responsible on the financial management function in a business organization: On the organizational structure presented, each line is working for the interest of the person on the line above them. Each of the position have several contributions towards making decisions that can affect aspects of the whole organization. For example, on the budgeting function, if the VP for finance suggested a new budget implementation for the whole organization, and the higher position approve those changes, the whole organization will be affected. With this, every financial decision made, creates an impact on the financial aspects of the whole business organization. The following are the role of each individuals involved in the Financial management Function in a certain organization: 1. Board of Directors: Considered as 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: a. Setting policies on investments, capital structure and dividend policies. b. Approving company’s strategies, goals and budgets. c. Appointing and removing members of the top management including the president. d. Determining top management’s compensation. e. Approving the information and other disclosures reported in the financial statements (Cayanan, 2015)  2. President (Chief Executive Officer): The responsibilities of a president are the following: a. Approving the information and other disclosures reported in the financial statements. b. Overseeing the operations of a company and ensuring that the strategies as approved by the board are implemented as planned. c. Performing all areas of management: planning, organizing, staffing, directing and controlling. d. Representing the company in professional, social, and civic activities. 3. VP for Marketing: The following are among the responsibilities of VP for Marketing : a. Formulating marketing strategies and plans. Directing and coordinating company sales. b. Performing market and competitor analysis. c. Analyzing and evaluating the effectiveness and cost of marketing methods applied. d. 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. e. Promoting good relationships with customers and distributors. (Cayanan, 2015) 4. VP for Production: The following are among the responsibilities of VP for Production: a. Ensuring production meets customer demands. b. Identifying production technology/process that minimizes production cost and make the company cost competitive. c. Coming up with a production plan that maximizes the utilization of the company’s production facilities. d. Identifying adequate and cheap raw material suppliers. (Cayanan, 2015) 5. VP for Administration: The following are among the responsibilities: a. Coordinating the functions of administration, finance, and marketing departments. b. Assisting other departments in hiring employees. c. Providing assistance in payroll preparation, payment of vendors, and collection of receivables. d. 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)  to determine the appropriate capital structure of the company. Capital structure refers to how much of your total assets financed by debt and how much is financed by equity. 1. Financing decisions- include making decisions as to how to finance long-term investments and working capital- which deals with the day-to-day operations of the company. 2. Investing Decisions- To minimize the probability of failure, long-term investments have supported by a capital budgeting analysis. 3. Operating Decisions – deal with the daily operations of the company especially on how to finance working capital accounts such as accounts receivable and inventories. 4. Dividend Policies – Dividend is a part of profits that are available for distribution, to equity shareholders. The Finance manager must decide whether the firm should distribute all the profits or retain them or distribute a portion and retain the balance. GLORIFICETUR DEUS That in all things God may be glorified Sources: Introduction to Financial Management by Herrera J. (2020) Business Finance for Senior High School by Flores M. (2018) Business Finance by Cayanan A. (2017)