expectations for this class? CLASS ACTIVITY On a sheet of paper, answer the following questions: A. How much is your daily allowance? If not given daily, how much is your average allowance per day? B. Write down all the items you spend money on. List the description and peso amount spent. C. Compute for the balance of your allowance by deducting the expenses you listed from your daily allowance. D. If the answer to Question C is positive, what do you do with the money left? If the answer is negative, where do you get additional money? Finance in Everyday Life Finance - can be defined as the science and art of managing money (Gitman & Zutter, 2012). Budgeting is the act of estimating revenue (in the form of their allowance) and expenses over a period of time (in this case, on a daily basis). Investments come in many forms that will generate income or appreciate in the future. Sources of funds - people or institutions that will give us the money we need. For individuals, Finance is concerned with decisions about: *How much of their earnings they spend *How much they save or how much they need *How they invest their savings *How they raise additional funds they need (Gitman). Review of Prerequisite Knowledge Forms of Business Organizations Forms of Business Organizations Sole Proprietorship - A business owned by one person and operated for his or her own profit. Partnership - A business owned by two or more people and operated for profit. Corporation – An entity created by law owned by shareholders. How can you say that you are shareholders of a corporation? How and where can you buy stocks? Examples of Corporation PLDT Globe, JFC BPI Banco Deo Oro San Miguel Corporation Corporations may either be privately owned or publicly owned. Privately owned corporations are often owned by family members whose stocks may not be offered to outsiders unless consent by the family members is secured. Companies which are publicly listed are owned by unrelated investors and are traded in organized exchanges like the Philippine Stock Exchange. While there are many stockholders, there is generally a group of investors or a family which controls each listed company. For example, in the case of BPI, the biggest stockholder is Ayala Corporation and in the case of Banco De Oro, it is SM Investment Corporation. Prices of stocks of listed corporations are driven by several factors such as the earnings of the companies, the prospects of the industry where these companies operate, the general market sentiment, and the economic prospects of the country, among others. Knowing the Shareholder Suppose you are the biggest shareholder in a corporation, what do you think are your objectives as owners of the corporation? Shareholders’ objectives as owners of the corporation
Be profitable Do you think a profitable company is a successful company? Can success be attributed to profitability only? Is it possible that a company can have profits but still does not have enough cash to pay its obligations (i.e. suppliers, lenders)? What will happen if the company cannot pay its obligations? Shareholders’ objectives as owners of the corporation
Have a lot of cash
What do you think of a company who has very large amount of cash? What do you think of a company who has very large amount of cash?
Good What do you think of a company who has very large amount of cash?
…signals unhealthy company
practices What do you think of a company who has very large amount of cash?
The management has not been
putting the company’s resources into good use. What do you think of a company who has very large amount of cash?
They will be missing out on
investment opportunities. What do you think is the shareholders’ overall objective as owners of the corporation? Shareholders’ Overall objective as owners of the corporation
Wealth Maximization What defines a shareholder’s wealth? How do we measure shareholders wealth? Suppose you bought 10 shares of Globe Telecom at PHP2,510 each on September 9, 2010. This brings your investments to PHP25,100. What happens to the value of your investment if the price goes up to PHP2,600 per share or it goes down to PHP2,300 per share? How do we measure shareholders wealth? Shareholders’ wealth is measured based on the current market price of the corporation’s stocks. Factors that Influence Market Price Controllable by Uncontrollable Management External Factor • profitability • microeconomic • having a good liquidity and conditions reasonable leverage position •political stability • dividends • prospects of the • competent management industry where the which affects the company’s company operates operating efficiency • general market • coming up with corporate sentiment plans that improve the • flow of foreign funds business prospects of the invested in the company Philippine stock market Factors that Influence Market Price Controllable by Management
1. Profitability Which do you think is a more attractive company? Factors that Influence Market Price Controllable by Management
2. Good liquidity and
reasonable leverage position Factors that Influence Market Price Controllable by Management
Liquidity and leverage refers to the company’s
management of the type and amount of assets and liabilities that it will hold in the course of its operations. Factors that Influence Market Price Controllable by Management
3. Dividends Holders of shares receive dividends from a corporation as returns on their investments in form of cash or other properties. Factors that Influence Market Price Controllable by Management
4. Competent management. Competent managers may have any of the following attributes 1) visionary 2) decisive 3) people-oriented, 4) inspiring, 5) innovative, 6) respected and 7) experienced/seasoned manager. - Factors that Influence Market Price Controllable by Management
5. Corporate plans that improve the
business prospects. External Factors that Influence Market Price External Factors that Influence Market Price These factors influences the general reaction of investors in making an investment decision. External Factors that Influence Market Price
- Its effect is not only to a specific
company but on all companies or a group of companies under similar circumstances. External Factors that Influence Market Price - Such factors are a result of the environment a company operates in rather than the decisions of the company’s management Given the factors that influence market price, how will the company ensure that such objectives will be achieved? Role of Financial Management 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. Directions: Answer the following.
1. Define the following terms: (2
POINTS EACH) a. Finance b. Budgeting c. Investments d. Sources of funds Directions: Answer the following.
2. If ever you are in a situation where
you are short of cash, what would you do? Where will you get extra cash? (3 POINTS) Directions: Answer the following.
3. Identify and describe 3 forms of
business organization. (6 POINTS) Directions: Answer the following.
4. What is the overall objective a
shareholder? How are shareholders’ wealth being measured? (3 POINTS) Directions: Answer the following.
5. What are the two major factors
that influence current market price? Given the factors that influence market price, how will the company ensure that thier objectives will be achieved? (5 POINTS) HOMEWORK Go to a business in your locality. Ask who is in charge of the finances of the business. Interview the “Chief Financial Officer (“CFO”) or the Vice- President for Finance” and ask them to report about their roles and functions within the organization.
Dividend Investing I Complete Beginner’s Guide to Learn How to Create Passive Income by Trading Dividend Stocks I Start Achieving Financial Freedom and Planning Your Early Retirement
Dividend Investing I Complete Beginner’s Guide to Learn How to Create Passive Income by Trading Dividend Stocks I Start Achieving Financial Freedom and Planning Your Early Retirement
