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FINANCIAL MANAGEMENT
1st Semester |A.Y. 2025 - 2026
Mr. Kenneth B. Pedrajas, CPA, CTT
Financial Management
the science and art of managing money” (Gitman and Zutter, 2012)
application of management functions such as planning, organizing, leading, and controlling financial
assets to achieve organizational goals
Financial management helps individuals, governments, and businesses achieve their goals. It involves
finance: the activity of acquiring, spending, and managing money and other financial assets.
determines the following:
how much additional funds are needed and how to obtain it
how, where, and when to invest if there are excess funds
Wealth Maximization
overall long-term goal in a business
takes into account both risks and return; growth and survival
Profit Maximization
short-term profits may increase at the expense of long-term profitability
the company may need to borrow money to increase sales or expand production capacity
Financial System
● interaction between people, businesses, and governments
● facilitates and expedites the flow of funds or financial capital
○ between savers and borrowers or investors
○ from savings to investments
● Components
○ Financial Institutions - an organization that directs the transfer of financial resources from its
source to potential users (Kaliski, 2007)
- plays the part of intermediaries, managing the efficient flow of funds
between savers and borrowers (Collins, 2012)
Banks where people:
○ keep their savings
○ withdraw their money
○ acquire credit and debit cards
○ apply for personal or business loans
Insurance and investment companies where people:
○ pay premiums
○ invest their money
○ transfer risks
○ Financial Markets - provides a platform for financial managers to acquire funds from various
sources (Kaliski, 2007)
- allows the exchange of financial resources in:
Capital Market
1. Exchange of long-term securities,
2. Traded through brokers and dealers,
3. May or may not occur in an organized stock exchange
Ps: Philippine Stock Exchange (PSE) is where the buying and selling of corporate
stocks happen. The PSE is an example of a capital market.
Money Market
1. Exchange of short-term securities (treasury bills, commercial paper, and
negotiable instruments (Collins, 2012)
2. Traded through brokers and dealers,
3. May or may not occur in an organized stock exchange
FINANCIAL MANAGEMENT
1st Semester |A.Y. 2025 - 2026
Mr. Kenneth B. Pedrajas, CPA, CTT
○ Financial Instruments - any contract which produces a financial asset of one party while
creating a financial liability or equity instrument of another (IFAC, 2020)
Examples: corporate bonds, checks, futures, option contracts, shares of stock
● Buying items using a Credit Card
a financial asset for the bank
a liability to debtors
THE CORPORATE ORGANIZATIONAL STRUCTURE
1. Board of Directors
● Elected by shareholders
● Represents the shareholders in overseeing the business
2. President and CEO
● Highest officer in managing the business to achieve long-term (CEO) and short-term (President) goals
● For some companies, these are different persons and entities
3. VP for Sales and Marketing
Responsible for leading revenue and client portfolio activities of the company
4. VP for Production
Leads the creation of goods and services
5. VP for Administration
Leads the human resources and general management activities
6. VP for Finance or Chief Financial Officer (CFO)
Manages acquisition of funds, investments, operating activities, and dividend policies
7. Treasurer
Handles external financing matters
FINANCIAL MANAGEMENT
1st Semester |A.Y. 2025 - 2026
Mr. Kenneth B. Pedrajas, CPA, CTT
Responsible for managing the cash, investments, and other financial resources
8. Controller
concerned with internal matters such as being in charge of accounting and the financial records
of the organization
The Roles of Financial Manager
1. Financing Decisions - when, where, and how to acquire funds for the company
Types of Financing:
1. Debt Financing -
2. Equity Financing -
2. Investing Decisions - what investments would be profitable to the company
Types of Investments:
1. Short-Term (Working Capital)
2. Long-Term (Capital Budgeting)
3. Operation Decisions - how to finance working capital accounts such as accounts receivables and
inventories (The company has options on whether to finance working capital needs by long-term or
short-term.)
4. Dividend Policies - how much should be distributed among the shareholders and how much should
be retained for future contingencies. (A common goal of all business ventures is to earn profit or to
have a positive return).
Keep In Mind !!!
Financial management is the effective and efficient management of
assets, liabilities, and equity to achieve the company’s primary goal:
the maximization of shareholders’ wealth. To do this, financial
managers consider the long-term results, the risks or uncertainty, the
timing of returns, and the stockholders’ return.
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FINANCIAL MANAGEMENT
1st Semester |A.Y. 2025 - 2026
Mr. Kenneth B. Pedrajas, CPA, CTT
