Financial Management
Financial Management
Chapter 1
Finance person takes charge of the
investments of stakeholders, the use of
funds in the operation and the
distribution of income to the business.
Stakeholders are stockholders or equity
owners and also the lenders or loan
grantors.
Cost-benefit relationships important to
capital budgeting
The return of the investments should be
greater than cost The goal of financial
management is profit maximization not
only short term but also for long term
Working capital management consist of
managing of current assets and current
liabilities.
Chapter 2
3 types of businesses
1. Trading or Merchandising is the
buying of goods and selling the same
without change in form.
2. Manufacturing is the process of
converting raw materials into finished
products.
Raw materials are what you
see in the completed product
Direct Labor is the work in the
raw materials as it is converted
into finished product
Factory overhead is the
resource needed or cost that is
needed to be paid for in making
products other than raw
materials and direct labor.
3. Service is doing work for others.
Classes of Partners
As to their liability for partnership debts
Promoter
is
one
who
undertakes
to
form
a
corporation, or causes it to be
formed for a specified purpose
or purposes, and who further
undertakes to procure for the
corporation.
No corporate name may be
allowed by SEC if he proposed
named is identical, deceptively
or confusingly similar to that
any existing corporation or to
any other name already
protected by the law.
The purpose for which the
company is formed must be
grouped into primary or
secondary.
Number and qualifications of
incorporators.
Corporation
codes provide that 5 or more
persons, not exceeding fifteen a
majority are residents of the
Phil, may form a private
corporation for any lawful
purpose or purposes
Minors cannot be incorporators
Chapter 3
Accounting is defined as an information
system that measures, processes and
communicates information primarily financial in
Net
income/Average
stockholders equity
2. Operating efficiency
COGS/ average inventories
Average collection period
Sales/Ave. Fixed Assets
Sales/ Ave. Total Assets
Gross profit/sales
Marketing
and
Administrative expenses/
Sales
Comparative analysis
(Horizontal and vertical)
3. Liquidity
Current assets/ current
liability
Cash, marketable securities,
receivables/current
liabilities
Users of Financial Information
1.
2.
3.
4.
5.
6.
7.
Current owners
Management
Creditors
Future investors
Employees
Government
Public
Horizontal
analysis
involves
sidewise
comparisons. It shows changes from year to
year.
Measures of solvency
1. Networking capital is the excess of
current assets after deducting liabilities.
This is called margin of safety of short
term creditors.
NWC= TCA-TCL
2. Current ratio is the relationship of
available current assets to meet
assets/current
=
Net
Income
for
the
period/Average Owners Equity
6. Ratio of Net Income to Total Assets
=Net Income/Total Assets
7. Ratio of Net Sales to Total Assets
= Net Sales/Total Assets
8. Break Even Point Sales is that
volume sales result neither profit
nor loss on operations.
Chapter 5
Types of Corporation
1. Public Corporation is those formed by
legislature for political or governmental
purposes. Municipal Corporation.
2. Private Corporation are those formed
for some private purposed, aim or end.
3. Domestic Corporation are those
incorporated by Phil laws
4. Foreign Corporation are formed,
organized or existing under any laws
other than those of the Philippines and
whose allow Filipino citizens and
corporations to do business in its own
country or state
5. Closely held Corporation
6. Stock
Corporation
are
private
corporations which have capital stock
divided into shares and are authorized
to distribute to the holders of such
dividends or allotments of surplus
profits on the basis of shares held.
7. Non-stock Corporation is one where no
part of its income is distributable as
dividends to its members, trustees, or
officers.
Components of Corporation
a.
b.
c.
d.
Corporators
Incorporators
Stockholders
Members