2024

MANAGING
THE
xxxx xxx xxx
FINANCE
FUNCTION
CHUTIMOONKUL | MARCILLANA | REYES
EFFECTIVE FINANCIAL MANAGEMENT IS IMPORTANT
FOR TECHNOLOGY COMPANIES BECAUSE IT ENABLES
THEM TO USE RESOURCES EFFICIENTLY, MAKE
INFORMED DECISIONS AND DRIVE GROWTH. BY
PROPERLY MANAGING FINANCES, TECHNOLOGY
COMPANIES CAN INTELLIGENTLY ALLOCATE BUDGETS
FOR RESEARCH AND DEVELOPMENT, JOBS, AND
TALENT ACQUISITION TO ENSURE CONTINUED
INNOVATION AND COMPETITIVENESS IN THE MARKET
 FINANCE FUNCTION
FINANCIAL SERVICES ARE ACTIONS AND ACTIVITIES
FOCUSED ON MANAGING THE FINANCIAL RESOURCES
OF A BUSINESS FOR PROFIT. THEY ARE ESSENTIAL IN
ACQUIRING AND MAINTAINING FINANCIAL RESOURCES
AND CONTRIBUTE TO THE EFFECTIVENESS OF NEW
BUSINESS ACTIVITIES, POLICIES AND DECISIONS
DETERMINATION OF FUND REQUIREMENTS

To Finance Daily Operations

1.

2.
To Finance the Firm’s Credit Services

3. To Finance the Purchase of Inventory

4. To Finance the Purchase of

Major Assets
FINANCING DAILY OPERATIONS
1. wages and salaries 4. power and light

2. rent 5. marketing expenses

3. taxes 6. administrative expenses

FINANCING THE FIRM’S CREDIT SERVICES
Financing the engineering firm's credit services includes acquiring price
range or credit traces to guide the organization's operations, projects, and
growth initiatives. This technique encompasses various sports including
securing loans, strains of credit score, or different types of financing from
financial establishments or traders. The funds acquired through credit
offerings are applied to cover costs related to system purchases,
assignment development, research and improvement, payroll, and different
operational desires. Effective control of credit score services includes
assessing the corporation's monetary wishes, negotiating favorable terms
with creditors, tracking cash flows, and ensuring well timed compensation
to preserve a effective credit score and preserve the organization's
financial health and increase trajectory.
FINANCING THE PURCHASE OF INVENTORY
Maintaining adequate inventory is important for many
companies. Raw materials, supplies and parts need to be kept
in storage so they will be available when needed. Many
companies cannot accommodate critical delays in the
manufacturing process, so these must be kept ready whenever
needed
But buying enough will require capital and this must be
protected.
Inventory sometimes ties up a lot of unnecessary cash.
FINANCING THE PURCHASE OF MAJOR ASSETS
Financing the engineering organization's most important belongings
includes acquiring investment or credit preparations particularly special
for obtaining vital belongings which include gadget, centers, land, and
era vital for the corporation's operations and initiatives. This method
includes comparing the company's asset requirements, thinking about
various financing options along with loans, leases, or asset-sponsored
securities, and negotiating favorable phrases with lenders or lessors.
Efficient management of asset financing includes assessing the
corporation's capacity to pay off debt, optimizing the shape of financing
preparations to minimize charges and risks, and ensuring that the
belongings acquired contribute to enhancing productivity, efficiency,
and competitiveness inside the engineering sector.
THE SOURCE OF FUNDS
1. cash sales 4. sales assets

collection and
2.
allocation of 5. ownership contribution
receivables

3. loans and credits 6. advances from

costumers
 SHORT TERM SOURCES OF FUNDS
Short-term sources of funds refer to the financial
resources that a company or organization can access
for a relatively short period of time, usually less than
one year. These funds are used to meet the
company's immediate or short-term financial
obligations. Short-term sources of funds are typically
used to cover expenses such as inventory purchases,
payroll, and short-term debt repayment.
 SHORT TERM SOURCES OF FUNDS
ADVANTAGES DISADVANTAGES

1. Quick Access to Funds 1.

4. High Risk

2. Flexibility 2. Refinancing Risk

3.
Lower Interest Cost 3. Limited Funding Amount

4. Improved Cash Flow 4. External Sources

 SHORT TERM SOURCES OF FUNDS
SUPPLIES OF SHORT TERM FUNDS

1. Trade Credit 5.
4. Factoring

2. Bank Loans 6. Trade Advances

3.
Commercial Paper 7. Short-Term Business Credit
Cards

4. Revolving Credit
 LONG TERM SOURCES OF FUNDS
Long-term debts refer to financial obligations that extend
beyond one year and are typically used to finance large-
scale investments or projects. These debts are an important
component of a company's capital structure and can provide
the necessary funds for long-term growth and expansion
Types of long term debts:
1. Bonds
2. Bank loans
3. Debentures
4. Mortage Loans
 COMMON STOCK
The issuance of common stock can provide a company
with long-term equity financing to support its growth and
investment initiatives. It is important for companies to
carefully consider the implications of issuing common
stock and to manage their equity capital structure
effectively.
 RETAINED EARNINGS
Retained earnings are a component of a company's
equity and represent the accumulated profits or losses
that have been retained within the company since its
inception. Retained earnings are not a direct source of
funds, but they can be considered a long-term source of
internal financing for a company.
 SHORT TERM SOURCES OF FUNDS
FACTORS IN SOURCES OF FINANCING

1. Flexibility 5.
4. Cost

2. Risk 6. Availability

3.
Income 7. Other Factors

4. Control
 THE FIRM’S FINANCIAL HEALTH
Financial health refers to the overall well-being of
a company's financial position. It takes into account
various aspects, such as the company's profitability,
liquidity, debt levels, and cash flow. By evaluating
these factors, you can get a comprehensive picture of
the company's financial strength and stability.
THE FIRM’S FINANCIAL HEALTH
Objectives of the engineering firms:

1. to make profits for the owners

to satisfy creditors with the repayment of loans plus

2.
interest
to maintain the viability of the firm so that customers willl
be assured of a continuous supply of products or services,
3.
employees will be assured of employment, suppliers will be
assured of market
INDICATORS OF FINANCIAL HEALTH
Three basic financial statements

1. Balance Sheet or Statement of Financial Position

2. Income Statement

3. Statement of changes in Financial Position

INDICATORS OF FINANCIAL HEALTH
Balance Sheet or Statement
1.
of Financial Position
A balance sheet is a
financial statement that
contains details of a
company's assets or
liabilities at a specific point
in time.
INDICATORS OF FINANCIAL HEALTH
Income Statement
2.

An income statement shows

a company's revenues,
expenses and profitability
over a period of time.
INDICATORS OF FINANCIAL HEALTH
Statement of changes in
3
Financial Position
The Statement of Changes in
Financial Position or Cash Flow
statement, provides
information about the
operating, financing, and
investing activities of the
company and the effects of
those activities on the cash
position of the company.
RISK MANAGEMENT AND INSURANCE
The engineer manager, especially those at the top
level, is entrusted with the function of marking
profits for the company. This will happen if losses
brought by improper management of risks are
avoided.
 fire
Risk refers to the
theft
uncertainty concerning
floods
loss or injury. The
accidents
engineering firm is faced
non-payment of bills
with a long list of
by costumers (bad
exposure to risk, some of
debts)
which are as follows;
disability and death
damage claim from
other parties.
 TYPE OF RISK
PURE RISK SPECULATIVE RISK
Pure risk is one in each “ there Speculative risk is one in
is only a chance of loss”, this which there is a chance of
means that there is no way of either loss or gain. This type
making gains with pure risk. of risk is not insurable.
Pure risk are insurable and
may be covered by insurance
Ex. investment in common
stocks.
Ex. the exposure to loss of the
company’s motor car due to
theft.
 RISK MANAGEMENT

Risk Management is “an organized strategy for protecting and

conserving assets and people. The purpose of risk management is
“ to choose intelligently from among all the available methods of
dealing with risk in order to secure the economic survival of the
firm.

.
METHODS OF DEALING WITH RISK
the risk may be
1. 4. the losses may be
avoided
reduced
the risk may be the risk may be
2. 5.
retained shifted

the hazard may be

3.
reduced
Risk retention is a method of handling risk wherein the
management assumes the risk.

A planned risk retention, also called self-insurance, is a conscious

and deliberate assumption of a recognized risk. In this case
management decides to pay losses out of currently available
funds.
A hazard is a dangerous phenomenon, substance, human activity
or condition. It may cause loss of life, injury or other health
impacts, property damage, loss of livelihoods and services, social
and economic disruption, or environmental damage.

Hazards may be reduced by simply instituting appropriate

measures in a variety of business activities. An example is
prohibiting unauthorized persons to enter the cashier’s office. This
will reduce the hazard of theft. Another example is prohibiting
company drivers from taking alcohol or drugs while on duty
When losses occur in spite of preventive measures, the severity of loss may
be limited by way of reducing the concentration of exposures. Examples of
efforts on loss reduction are as follows;
physically separating buildings to minimize losses in case of fire,
using fireproof materials on interior building construction;
storing inventory in several locations to minimize losses in cases of fire
and theft;
maintaining duplicate records to reduce accounts recievable losses;
transporting goods in separate vehicles instead of concentrating high
values in single shipments;
prohibiting key employees from travelling together; and
limiting legal liability by forming several separate corporations.
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