INTRODUCTION
TO FINANCIAL
MANAGEMENT
Prepared by:
Madeleen M. Hernandez, CPA
LEARNING OBJECTIVES
• Define finance management and the three key elements
to the process of financial management.
• Identify the major areas and opportunities available in the
field of finance.
• Determine and compare the legal forms of business
organization.
• Describe the managerial finance function and its
relationship to economics and accounting.
• Determine the roles of the financial manager.
• Identify the goal of the firm, corporate governance, the
role of ethics, and the agency issue.
• Discuss business taxes and their importance in financial
decisions.
What is Financial Management?
Financial Management is about preparing,
directing and managing the money activities of a
company such as buying, selling and using money to
its best results to maximize wealth or produce best
value for money.
FINANCE
PERSONAL FINANCE - deals with
individuals’ decisions concerning the
spending and investing of income.
BUSINESS FINANCE - involves same type of
decisions focusing on how the firms raise
money from investors, how to invest
money to earn a profit, and how to
reinvest profits in the business or
distribute them back to investors.
Three Key Elements to the process of Financial
Management
• FINANCIAL PLANNING
• FINANCIAL CONTROL
• FINANCIAL DECISION MAKING
Scope of financial Management
• Anticipation
• Acquisition
• Allocation
• Appropriation
• Assessment
Finance Areas and Career
Opportunities
• Financial Service
• Managerial Finance
Finance Areas and Career
Opportunities
Professional Certifications in Finance
Chartered Financial Analyst (CFA)
Certified Treasury Professional (CTP)
Certified Financial Planner (CFP)
American Academy of Financial Management
(AAFM)
Professional Certifications in Accounting
Certified Public Accountant (CPA)
Management Accountant (CMA)
Certified Internal Auditor (CIA)
Legal Forms of Business
Organization
• Sole Proprietorship
• Partnership
• Corporation
FINANCE,
ECONOMICS
AND
ACCOUNTING
ECONOMICS VS.
FINACE
ECONOMICS - The study of choice. It is a
social science that deals with individual
or collective economic activities such as
production, consumption, distribution
and transfer of money and wealth.
FINANCE – The science and art of
managing money
FINANCE vs.
Accounting
Accounting – uses accrual
method
Finance – cash method
Goals of the Firm
and the Role of the
Finance Manager
GOAL OF THE FIRM
“Only take actions that are expected
to increase the share price”
GOAL OF THE FIRM
GOAL OF THE FIRM
• Timing is important
• Profits do not
necessarily result in
cash flows available
to stockholders
• Profit maximization
fails to account for
risk
ROLE OF THE FINANCE MANAGER
• Investment Decisions
• Financing Decisions
Corporate
Governance, Ethics
and Agency Issues
Corporate Governance
Corporate governance is a system of
organizational control that defines and
establishes the responsibility and
accountability of the major participants
in an organization
Business Ethics
Business ethics are the standards of
conduct or moral judgment that apply
to persons engaged in industry or
commerce
Agency Issues
The agency problem and the associated agency costs
can be reduced with the following:
• Properly constructed and implemented corporate
governance structure.
• Structured expenditures thru compensation plans
• Market forces such as shareholder crusading from
large institutional investors.
• Threat of hostile takeovers
Source: Financial Management by Payongayong, Roque and Ayuyao, 2nd Edition
